Preamble

The House met at Eleven o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

BILL PRESENTED

MINISTRY OF SOCIAL SECURITY

Bill to provide for the appointment of a Minister of Social Security and the transfer to him of the functions of the Minister of Pensions and National Insurance and of certain functions of the National Assistance Board; to replace Part II of the National Assistance Act 1948 by provisions giving rights to noncontributory benefit; and for purposes connected with those matters, presented by Miss Margaret Herbison; supported by The Prime Minister, the Chancellor of the Exchequer, Mr. William Ross, Mr. Cledwyn Hughes, Mr. Douglas Houghton, Mr. Harold Davies, and Mr. Norman Pentland; read the First time; to be read a Second time on Monday next and to be printed. [Bill 18.]

Orders of the Day — PUBLIC WORKS LOANS BILL

Order for Second Reading read.

11.5 a.m.

The Financial Secretary to the Treasury (Mr. Niall MacDermot): I beg to move, That the Bill be now read a Second time.
This is a short routine Bill, the purpose of which is to make money available for the Public Works Loan Commissioners to lend to local authorities and certain other bodies. As the House knows, it is customary to present Bills at fairly frequent intervals so that Parliament may be kept informed and have an opportunity to review the extent of Exchequer lending to local authorities.
The last Public Works Loans Act received Royal Assent on 5th August last year and it enabled the Commissioners to lend up to a total of £500 million. This money has now been nearly spent and we must make further provision. When I introduced the 1965 Bill I said that the £500 million which we were asking Parliament to provide should be enough to meet the entitlement of local authorities until well into 1966.
As we seem to have had our summer for this year. I suppose that I could claim that we are on target. The truth is that the money has been running out rather more quickly than we anticipated, and this is because local authorities' total long-term borrowing needs have proved greater over the past year than we have expected.
There are a number of reasons for this, but in large part it is due to the fact that the authorities have been meeting more of their needs for capital by borrowing for one year or over, and have not been relying on short-term borrowing, which is, of course, a development which we encourage. The local authorities' temporary debt was scarcely any higher at 31st December, 1965, than on 31st December, 1964. In consequence, the percentage of temporary debt in the total debt had fallen from nearly 18 per cent. at the end of 1964 to 16¼ per cent. at the end of 1965.
The Public Works Loan Board is a very ancient body which has been making loans for public works since


early in the last century. In more recent years it has been exclusively concerned with making loans to local authorities. As the House knows from 1945 until 1955, that is during the whole of the period of the post-war Labour Government and for a short time afterwards, the Board provided practically the whole of the longer-term finance required by local authorities. In 1955, the position completely changed and the Board then became a lender of last resort. That is to say, it only provided finance to a local authority which could demonstrate that it could not obtain it on the market.
Moreover, the rate of interest charged by the Board, which previously had been roughly equivalent to the current yield on gilt-edged securities of similar length to the period of borrowing—that is the Government rate of borrowing—was raised to a rate reflecting the current level of local authority credit in the market. I will not seek to dwell on the merits or otherwise of this policy. It is a matter which has been debated in this House on many occasions.
The only point I want to make is that it led, for quite understandable reasons, to a great increase in the temporary borrowing of local authorities. This worried the then Government and as a result they issued in 1963 the well-known White Paper on local borrowing, which was a complete reversal of their 1955 policy. They announced that as part of the policy of restraining local authority temporary borrowing authorities were to be permitted to obtain a proportion of their long-term finance from the Public Works Loan Board at Government credit rates.
This proportion was started at 20 per cent. and the aim was, as expressed in the White Paper, to increase that by 10 per cent. annually to 50 per cent. in the fourth year; and, in addition, to help the small authorities, there was to be a minimum entitlement of £50,000 from the Board which it was hoped to increase eventually to £100,000.
In 1964–65, the White Paper programme was followed, except that soon after the Labour Government came to power we raised the minimum concession to £100,00C in order to assist the smaller authorities following the rise in Bank Rate. In 1965–66 we followed the White

Paper programme and raised the authorities' percentage access to 30 per cent. In addition, as part of our regional policy, we raised the percentage for authorities in the less prosperous regions—that is to say, in Scotland, Wales, the North and the North-West—to 40 per cent.
I think that that move was generally welcomed and it has proved of considerable assistance to authorities in those areas. Northern Ireland does not fall within the scope of the Public Works Loan Board activities and loans to authorities in Northern Ireland are dealt with by their own Government.
This year, as the House will know, we have decided that we cannot take the next step and increase the general percentage from 30 to 40 per cent. This is because the burden on the Exchequer of making such an increase would have been unacceptable in the present circumstances. The Exchequer would have had to borrow to provide the money needed, and I hardly need remind the House of the necessity at this stage of containing the Government's borrowing requirement.
In 1965–66, gross Exchequer loans to the local loans fund were £603 million. Our present estimate is that if the rules governing access were left unchanged and the percentage quota for all authorities were increased to 40 per cent. we should need to find over £700 million this year. Even to leave the general quota at 30 per cent. would not be enough to reduce the demands of the Exchequer to tolerable proportions, and, therefore, the rules for access have been changed. The combined effect of these two decisions is to reduce the estimate of gross Exchequer issues to under £500 million.
Under the new rules, an authority's quota will be reduced to the extent that it has already drawn a quota loan in one year on borrowing maturing in the succeeding year. This means that an authority which in, say, the year 1965–66 borrowed in the market a sum which is due to mature in 1966–67 and has earned a quota on it will not be able to earn another quota in 1966–67 when it re-borrows in the market to repay this debt. This decision not only helps to reduce the demand on the Exchequer, but, I would suggest, is equitable in itself and should allay the disquiet which I have reason to believe the Public Works Loan


Commissioners were feeling about the operation of the arrangements.
Under last year's rules an authority earned a quota on all long-term borrowing, which is defined as borrowing for one year or over. If an authority borrowed for one year it could earn a quota in the year in which it made the borrowing originally and also in the following year when it reborrowed to finance the maturing debt. In that way over two years it would earn twice as much quota as an authority which had borrowed in the first place for a longer period. This, I think the House will agree, would clearly be inequitable as between authorities and we hope these new arrangements will help to remove the inequity.
The House may agree that in the circumstances I have described our decisions are fully justified. It is imperative to reduce the call on the Exchequer, and, as hon. Members will remember, my right hon. Friend the Chancellor of the Exchequer made strenuous efforts this year to reduce the Government's borrowing requirement, with considerable success.
The 1963 White Paper, in announcing the programme of the aim of a 10 per cent. increase in access each year, contained a clear warning that in certain circumstances it might not be possible to adhere to the proposed timetable. Perhaps I might remind the House of the wording of paragraph 18 of that White Paper:
It is estimated that the call on the Exchequer under these arrangements will amount to about £200 million in the first year and rise by about £100 million each year to £500 million in the fourth year, though these estimates could be falsified. If for example authorities were to reduce the length of their long-term borrowing it would bring forward their demands on the Public Works Loan Board and it might become necessary to implement the arrangements more gradually.
These estimates have indeed been falsified. Gross Exchequer issues in 1965–66 were, as I have said, £603 million instead of the £300 million estimated for that year in the White Paper.
There were various reasons for this, including the steps which the Government have already taken to which I have referred, to give special help to the smaller local authorities and others in the less prosperous regions. I think that it is clear that there has been a tendency

among local authorities to shorten their long-term debt, and this is one of the factors which have produced the increased demand on the Public Works Loan Board. This is owing to the increased need to refinance maturing debts. It is right to say that there has also been an increase in the capital payments beyond the amount estimated at the time of the White Paper.
Even under the new arrangements the estimated gross Exchequer cost at £485 million will still be above the £400 million estimated for this year in the 1963 White Paper. In all, we estimate that the authorities will receive some £520 million gross from the Public Works Loan Board and this will represent 30 per cent. of the £1,700 million which we estimate authorities will need to raise by borrowing in the year 1966–67. To put it another way, this will represent over 60 per cent. of the £800 million new borrowing as opposed to refinancing.
I should like to take this opportunity of re-emphasising what the Chancellor of the Exchequer said in his Budget speech about local authority borrowing, namely, that the Government continue to adhere to the general principles of the 1963 White Paper.
I now turn to the provisions of the Bill.

Sir Cyril Osborne: If the Chancellor of the Exchequer is to borrow less money himself in the market, which we all welcome, is there no chance that the interest rate will fall as a consequence and that, therefore, these loans could be borrowed more cheaply?

Mr. MacDermot: I should not like to predict what the effect will be on interest rates of the reduced borrowing requirement by the Exchequer in the coming year.

Mr. John Biffen: Could the hon. and learned Gentleman tell us by how much he reckons local authority borrowing will increase in real terms in the current year over the year that has just ended?

Mr. MacDermot: It is a difficult calculation to make in real terms this year because a lot of the borrowing is the refinancing of maturing debt. Changes in the value of money are not relevant,


because what is being refinanced is the face value of the moneys. In relation to what I have been saying, it is right to point out that there is still a substantial margin. The £485 million which we envisage as being the amount that will be loaned to local authorities through the Board will still be greater than the £400 million which was provided for in the White Paper.

Mr. Biffen: I appreciate that. I am happy not to have it in real terms, though the White Paper recently published on the control of public expenditure gave figures in real terms. I am interested not in the percentage increase in the amount loaned through the Public Works Loans Board, but the percentage increase in total local authority borrowing.

Mr. MacDermot: I have not a figure at my fingertips, but I will see if I can obtain one. When I reply to the debate, assuming I have the leave of the House to do so, I will let the hon. Gentleman know.
There is only one Clause of substance in the Bill. The first subsection provides for a sum of £900 million to be put at the disposal of the Public Works Loan Commissioners. We estimate that that should meet their requirements until about the end of 1967. I say that with full awareness of the dangers of making prophecies in these matters, but it is right that I should tell the House for what period we envisage that the sum should last.
We are not concerned with the size of the local authorities' capital programmes, which are controlled in other ways, and that is well understood by the House. Nor are we concerned with the total borrowing requirements of the authorities. What we are concerned with is the narrow but nonetheless important question of the amounts which the local authorities borrow from the Exchequer instead of directly from the market. The amount that we are now asking Parliament to provide will eventually be reflected in Exchequer issues and, therefore, in the Budget.
The second part of the Clause limits issues under the Act to the period during which the Act is operative; that is, the period between the passing of this Bill and the next one.
The third subsection permits the Loan Commissioners, as they have been permitted

in previous Acts, to undertake to make loans which will be met out of funds made available by the next Act. That provision is to ensure continuity of business.
The Bill provides that the amounts actually issued, plus the outstanding commitments, will not exceed £950 million. Therefore, the amount that the Loan Commissioners can agree to lend is £50 million more than the cash provision available to them.
I do not think that I need say any more about the Bill itself. But I should not wish to conclude without taking an opportunity of expressing my thanks and the thanks of the whole House to the Public Works Loan Commissioners for the services that they have rendered. As the House knows, those services are on an entirely voluntary basis. Last year, as the House will remember, we introduced a new system for borrowing by local authorities from the Board. Authorities no longer have to execute mortgage deeds in favour of the Board, but there is an automatic charge. That has simplified the work of the authorities, and the new arrangements have been working very smoothly. That is due in no small measure to the efficiency of the Commissioners and their staff.

11.24 a.m.

Mrs. Margaret Thatcher: May I follow the Financial Secretary in expressing our appreciation to the Commissioners for the tremendous amount of work that they do and the way in which they carry it out? My own thanks are specially due for the 90th Report of their work, which they have even managed to make sound interesting. It contains a detailed account of the history of the Board back to the year 1817, when I note that, even in those days, loans were issued carrying an interest rate of some 5 per cent. Our thanks on all sides of the House are due to the Commissioners for the work that they do continually on a voluntary basis.
The Financial Secretary pointed out several times the need for the Exchequer to limit its borrowing this year, and that the Chancellor had been fairly successful in meeting that aim. In reply, I must point out that one of the reasons why the Chancellor has limited his borrowing this year—that is to say, borrowing for


which he pays interest—is that, by various devices which the Financial Secretary will know, he has compelled everyone to make large interest-free loans to him, and, therefore, the amount for which he is having to pay is considerably reduced.
It is perhaps a little ironic that, at the beginning of the week, we were discussing a Measure under which local authorities would be compelled to make loans interest-free to the Government, and, at the end of the week, we are discussing a Measure whereby the Government will make loans to the local authorities for which they will charge them interest, albeit at a preferential rate.
The Financial Secretary gave a most lucid and helpful analysis of the Bill, of the Exchequer borrowing that will be required this year and of the issues from the Exchequer to the Public Works Loans Board. May I follow him in his analysis of the White Paper on Local Authority Borrowing, because there is not very much point in going over ground before that time? Present policy stems from that White Paper, and the policy which we now have before us in the Bill is to some extent a continuation and to some extent a modification of that policy.
At the outset, one can scarcely describe as a routine Bill one which provides about £900 million over a period of 18 months. It is an extremely important Bill. The £900 million amounts to virtually £45 for every family in the country; that is to say, every family has to provide £45 in order, then, to borrow it back.
Turning to the White Paper on Local Authority Borrowing, two and a half years have elapsed since it was presented, and I think it right that we should have a review to see how far its objectives have been attained. In introducing a similar Measure last year, the Financial Secretary pointed out that this year we should need to have a fresh look at the whole subject of local authority borrowing.
The White Paper covered three aspects of borrowing policy. First, it introduced a limit on short-term borrowing which it defined as borrowing of under 12 months' duration. Secondly, it provided for greater access to the Public Works Loans

Board, with the aim that the Board should ultimately provide 50 per cent. of long-term borrowing needs. I take it that that objective has not been abandoned, but still remains. Thirdly, it provided for the modernisation of borrowing and lending techniques between the Board and the borrowers. I say nothing more about that third objective because, in the main, it has been attained and implemented by previous Acts passed after the White Paper was published.
We are concerned, therefore, with how far the first two objectives, relating to short-term money and enlarged access to the Public Works Loan Board, have been achieved. The aim of short-term borrowing was to reduce to 20 per cent. of total borrowing the amount of money borrowed short-term, and that was to be achieved by the 1st April, 1968. Local authorities had some four years in which to modify their financial arrangements. At that time, about 15 per cent. of the outstanding loan debt was in short-term money.
The first of the four years showed an alarming increase to the figure the hon. and learned Gentleman gave last year of nearly 19 per cent. although it has been modified this year, as a number of statistics are always modified in retrospect, to about 18 per cent.

Mr. MacDermot: We should clear up this point. I was struck by the difference myself. The explanation lies in the different dates. The figure of 19 per cent. was up to 31st March and the figure I gave today of nearly 18 per cent. was up to 31st December. That is the reason for the apparent discrepancy.

Mrs. Thatcher: I am obliged to the hon. and learned Gentleman. In that case, the increase of short-term debt rose to about 19 per cent. of the total outstanding loan debt.
I think that this was probably because the first of the four years proved very inauspicious for funding. An interesting feature developed and it is a good illustration of what happens when one puts on a control of any kind. There is always a great deal of activity on the limits of the control. What happened was that short term borrowing lengthened and long term borrowing shortened and


so there was a good deal of borrowing of money between one year and two years.
This had been envisaged in paragraph 18 of the original White Paper, and the hon. and learned Gentleman has quoted the warning given that, if this increase in money between one year and two years took place, it would have a quite serious effect on the quotas from the Board and the whole basis upon which the calculations had to be made.
I agree that the Government, therefore, had to take action, as the new trend would have had far-reaching implications for Exchequer management. We first had some indication that action would take place in the White Paper "Loans from the Consolidated Fund", which said, in paragraph 10:
An authority's quota will however be reduced to the extent that it has already drawn a quota loan in one year on borrowing maturing in the succeeding year. It is estimated that on this basis the Exchequer issues to finance loans by the Board in 1966–67 will be about £485 million gross (£398 million net).
It would seem perhaps easy to describe this new development as being tantamount to redefining short-term borrowing as a period of up to two years instead of a period of up to one year. Thus one finds, in a sense, that the first objective of the White Paper is not being achieved very fast, but that the borrowing development envisaged in the White Paper has taken place and this in itself is causing a reassessment of the future of local authority financing.
I turn now to the second point concerning enlarged access to the Board. As the hon. and learned Gentlemen said, the expectation was that the percentage access should be increased every year. It has, as we know, reached 30 per cent. a year for ordinary local authorities and 40 per cent. for those in specific regions. Looking back to last year, I remember that there a form was issued to the local authorities which led them to believe that they could borrow three-sevenths of their total long terms loans from the Board.

Mr. Brian O'Malley: I had a similar difficulty in studying the figures. It might be helpful if I explained what the situation seems to be. Assuming that a local authority has a total capital expenditure in a year of

£100,000, obviously 30 per cent. is £30,000. But for the purpose and method of calculation the Board, in its circular to the local authorities, did not use the figure of £100,000, but the figure of £70,000—which is £100,000 minus 30 per cent. The quota is, therefore, three-sevenths of that 70 per cent., which is £30,000 and still 30 per cent. of £100,000.

Mrs. Thatcher: I did not have to deal with the forms but, having enquired from some local authorities and treasurers, I know that they expected this year to be able to borrow three-sevenths of their total long term borrowing. Some of them told me that they were rather disappointed that, with the new formula, the total amount they will be able to borrow is rather less than that. A number of them had already made plans on the basis that the old formula would continue and I think that even the hon. Gentleman would agree that the old formula—the formula which reigned before the one that the Financial Secretary has just explained—would have given them a higher amount from the Board than the new formula.
Indeed, had the larger amount been totalled up, the hon. and learned Gentleman has said that it would have come to much too high a sum for the Exchequer to bear and that is why it has been reduced. The effect is to cut the access this financial year by about £118 million. In some ways, I think that the local authorities themselves are critical of this arrangement. In the Local Government Chronicle of 7th May, 1966, on page 780, the following words occurred:
The provision made for loans to the nationalised industries is up by nearly £200 million; local authorities are still the poor nephews!".
I do not think that that comment is entirely warranted, as their borrowing was very considerably up last year and unexpectedly so, and I accept that the developments which have occurred in the changing borrowing habits of local authorities necessitated some changes in the policy of the Exchequer. The point is that the local authorities are wondering what will happen next. They have been making their plans on the basis of the White Paper on the basis of the old formula. This has suddenly been changed this year. What will happen next year?
How are they to make their plans for the future? The treasurers have to find the money and they suddenly have to revise their plans in the light of the amount which they can get from the Board. There is not a great deal they can do. They are told that they must not borrow short, so they attempt to borrow slightly longer. When they do, the effect of that is negatived. How long will that process go on? If they borrow slightly longer still, will the effect of that be negatived by the next Bill?
If they borrow really long, they will have to pay 7 per cent. or 7½ per cent. They will have to queue to get an issue from the Stock Exchange. They are in something of a difficulty in trying to find the money which Parliament, in its wisdom, has by Statute ordained that they must find. We make it clear that we do not blame treasurers for trying to borrow in a way that will reduce loan charges to the minimum. They are in some difficulty in trying to get their capital this year and are also worried as to what will happen next year.
During the Committee stage of last year's Act, the hon. and learned Gentleman pointed out that we would have to take a fresh look at the position of borrowing this year. I am not certain whether the policy he announced today and which became apparent in the White Paper issued with the Budget is a new policy or whether it is an interim policy. I suspect that it is the latter.
I ask, therefore, that we should soon have an announcement about the Government's long term policy. I understand that the local authorities regularly have discussions with the Treasury and an account of these sometimes appears in the Municipal Review. There was a supplement to the Municipal Review in May, 1966, which indicated the line some of the discussions had been taking. I quote from paragraph 11 of a record of one of the interviews with the Treasury, when the whole problem of shorter borrowing was discussed and the present policy was put up as an alternative. It states:
Subsequently an alternative proposal had been put to local authority associations which was to continue basing the calculation on gross longer-term borrowing but to reduce the quotas to the extent that an authority had already drawn a quota loan in one year on borrowings due to mature during the succeeding year,

this arrangement would affect loans raised for a period of from one to just under two years.
The next sentence is the important one from the point of view of this debate, for it states:
The Treasury would not regard this as necessarily suitable as a permanent arrangement but only as a possible interim measure pending a more thorough review of the problem.
That says, in effect, that what the Financial Secretary said today is only a temporary measure and I therefore ask him to give an indication of the kind of long-term permanent arrangement he is envisaging.
A great deal of the problem arises from the increased expenditure of local authorities—as my hon. Friend the Member for Oswestry (Mr. Biffen) pointed out by implication in a question to the Financial Secretary—and the total outstanding debt of local authorities is rising tremendously. One is tempted to wonder sometimes where it will end.
Considering the 90th Annual Report of the Public Works Loan Board, the figures in Appendix C show that in the year 1953–54 the total debt of local authorities to the Board and other lenders was £3,889 million. By 1958 it had risen to £6,030 million. By 1961–62 it had risen to £7,380 million and the latest estimate one can get for the year 1964–65 is £8,600 million.

Mr. David Winnick: Does the hon. Lady feel that local councils should spend less on housing, education and other essential amenities? She is implying that the amount of money being spent is far too high. Would she give an indication of where local councils should cut down on their expenditure?

Mr. Speaker: Order. If the hon. Lady did so she would be outwith the scope of the debate.

Mrs. Thatcher: I was not implying what the hon. Gentleman suggests. I was pointing out, as a matter of fact, how capital spending had risen, and it follows from that that when we are considering the policies, which we are not at the moment, of authorities in these respects, we must also consider how they are to meet the commitments which are placed on them. And, in considering that, it would seem relevant to consider the rate


at which these commitments are rising. How far are the commitments likely to rise this year? How much loan sanction was given in 1965 and is currently being given?
The latest figures we can obtain are those in the 1964 Report of the Ministry of Homing and Local Government, and we see that loan sanctions in 1964 totalled £1,082 million. I suspect that in 1965 the figure will be up to over £1,100 million and I expect that in 1966 it will be up again, especially bearing in mind that local authority lending on mortgage is to be reintroduced.
These figures do not, of course, take into account the increases which local authorities will have to bear as a result of the last Budget. I cannot go into detail on the housing or education programmes, but in asking the Financial Secretary about his future policy, I urge him to remember that the figures we have had to date do not take account of increases which we know are already in the pipeline—increases not only in policy terms but brought about by the rising costs of housing and education, without even taking into account the new policies.
One must also consider the effect of high loan charges on the rates. In 1965, for example, loan charges were £457 million, according to the White Paper issued with the Budget. That represents one-sixth of the total current expenditure of local authorities. Looked at from that angle, it is important to enlarge the access to the Public Works Loan Board to enable local authorities to borrow at a minimal rate of interest and to prevent them being driven on to the market for too high a proportion, which they must at present borrow at 7 per cent. to 7½ per cent.
I think the Financial Secretary will agree that it is unlikely that borrowing on long-term can be obtained by borrowing at lower rates of interest than those at present obtaining. I notice that the National Savings issue is 7¾ per cent. interest gross, and that seems a good indication of the price which the Government consider that they will have to pay for raising money in the long-term. It seems, therefore, that local authorities, if they go to the market for long-term maturities, will have to raise money at

7 per cent. to 7½ per cent. It therefore seems that local treasurers will attempt to raise as much short-term as possible, because that can be done at a very considerably reduced rate of interest below the 7 per cent.
I would not like to conclude without expressing admiration of the treasurers of local authorities because they have to grapple with all sorts of problems. They must raise money often without knowing from where it will come and, from their point of view, it is important that they should once again be able to decide their plans in the long-term.
My hon. Friends and I will, naturally, not oppose the Second Reading of the Bill in any way. We believe that it is partially a continuation of the White Paper, although we would like to know from the Financial Secretary what is the Government's policy for next year.

11.46 a.m.

Mr. W. O. J. Robinson: During the past three weeks, while I have been privileged to be a Member of this House, I have been trying to follow the advice given to me: that before rising to speak I should try to absorb the atmosphere of the House. I realise that there are attendant dangers in that, for one tends to become too overawed while waiting to speak. However, I have been encouraged by your kindness, Mr. Speaker, and the kindness and forbearance of hon. Members to risk that venture this morning.
I will refer, first, to East Walthamstow, the constituency which I have the privilege to represent. I cannot wax so lyrically about the constituency's geographical features as many of my hon. Friends have done about their constituences, but perhaps I might refer to two interesting poltical features of the area.
East Walthamstow has been a separate constituency since 1918 and, going back to 1885, it formed an identifiable part of South-West Essex. During the whole of that time it has been an area of fluctuating political fortunes, although it is a chastening thought that during the whole of that period it has never remained faithful to one political party for more than three successive General Elections. Perhaps I may be forgiven for expressing the hope—or should I say determination—that hereafter it will show more political stability.
I will refer to two of my predecessors and I refer to the first with no ambition or hope of emulation. He was a most eminent Parliamentarian and distinguished lawyer, Sir John Simon, as he then was. My immediate predecessor, Mr. John Harvey, had a splendid record of service in the House, as will be known by hon. Members who have more experience of this place than I have. I pay tribute to the splendid service which he rendered to his constituency during the 11 years he represented the district. He rightly earned the gratitude of all his constituents of whatever political persuasion or of none.
In describing East Walthamstow it would be true to say that although it has some light industry, bringing some employees into the area, it is mainly a dormitory suburb for workers in Central London. I am proud to have as residents in my constituency three members of the present Government, although that is a temporary measure since I understand that one of them was recently translated to the more rarefied atmosphere of Admiralty House.
Up to 1965, East Walthamstow formed part of the Borough of Walthamstow—a local authority which had a record second to none of progress in all fields of municipal activity. It had the ability to create, and created, a real feeling of community amongst the inhabitants of the area, and perhaps that feeling is exemplified by the motto of the borough, "Fellowship is Life"—taken from the writings of William Morris, who was born in Walthamstow and spent his early years there. Walthamstow now forms part of the London Borough of Waltham Forest and that name is a very pleasant reminder of the attachment of the area, physically and otherwise, to Epping Forest, which is such a tremendous blessing and delight to all residents of East London.
The area comprises Victorian and Edwardian villas and terrace houses, and this situation presents to the local authority a very urgent and special problem of urban renewal and the meeting of a housing shortage. There are many other problems that need to be tackled, such as the building and rebuilding of schools, the development of health and welfare services and a lot of other duties,

many of which have only recently been placed on the borough by local government reorganisation in Greater London. Without question, there lies ahead for my local authority a large capital expenditure programme, which is, perhaps, the excuse for my entering into this debate.
My hon. and learned Friend the Financial Secretary said that this is a routine procedure Bill. I acknowledge that, but it is, perhaps, not irrelevant to refer to the difficulties confronting local authorities in the borrowing of money to carry out their responsibilities and duties. I join in the tribute paid to the Public Works Loan Commissioners for the tremendous help they have given to local authorities over the years, and I also express my appreciation of the services rendered to local authorities and ratepayers by borough treasurers.
I am sure that it is unnecessary for me to stress the tremendous impact that interest rates have on the general rate and, more particularly, their impact on housing rents. In my own locality it has been necessary for the borough council to increase council rents by an average of 22s. per week. Fortunately, and sensibly, the council is phasing the increase and has introduced a very workable and very good rent rebate scheme.
I acknowledge, as local authorities do, the help which the promise of the new housing subsidies gives in that direction, but I must warn my right hon. Friend the Minister of Housing and Local Government that I may subsequently be quarrelling with him over his application of the retrospective provision. Those of us who have served on local authorities look back with a considerable amount of nostalgia to the period 1949–51, when local authorities could borrow the whole of their requirements from the Public Works Loan Board and when the interest rate was never higher than 3⅛ per cent.
My experience has been that the restriction of borrowing powers from the Board has led local authorities to indulge in a somewhat undignified scramble in the money market. The competition between them has undoubtedly served to force up interest rates, and has brought with it the attendant difficulties of short-term borrowing. Obviously, one is not unappreciative of the difficulties confronting the Treasury and Her Majesty's Government in this matter, but I hope


that when the financial climate improves, as I am confident it will, the Government will give first priority to a restoration to local authorities of the tremendous help resulting from being able to borrow all their requirements from the Board, and also the great benefit of a restoration of lower rates of interest.
I am very grateful to you, Mr. Speaker, for giving me the opportunity of catching your eye, and to hon. Members for their indulgence in listening to me.

11.55 a.m.

Mr. John Nott: I have listened with great interest to the maiden speech of the hon. Member for Waltham-stow, Fast (Mr. W. O. J. Robinson), but as I myself only made my own maiden speech about a week ago it would be presumptuous of me to congratulate him. I therefore leave that pleasant task to the hon. Member who follows me.
Capital expenditure by local government on housing, services and education over the last few years has been accounting for between one-fifth and one-seventh of our total capital expenditure. As demands for better housing and better services increase, I think that we can expect this proportion of total capital expenditure to accelerate between now and 1570. Whether it is right that an increasing proportion of our total capital expenditure should be invested in services rather than in industry, communications and agriculture is, fortunately not the subject we are debating today, but what we are debating is whether or not the present system of financing public works is efficient, and whether it could be improved upon.
It is all very simple and easy to cry out for cheaper rates of interest for housing and services, but it is more constructive and useful to discuss how this may be done. First, how it can be done without creating rapid inflation through overambitious investment in unproductive services. Secondly, how it can be done without damage to the strength of sterling. Thirdly, how public works can be financed without diminishing the enthusiasm for public service which exists in local government today. I should like to deal with each of these points in reverse order.
The crux of any argument surrounding the function and measure of assistance

granted by the Public Works Loan Board is that although it would be much simpler and neater for all borrowing by local authorities to be channelled through the Board, it would not be in the interests of the independence of local government for this to occur. To take the extreme that has been mentioned, for local authorities to find the whole of their capital expenditure through the Board, this, in my view, would mean that the independence of local representative government would be seriously threatened. For he who pays the piper calls the tune.
As has been said before, his worship the mayor, without any control over the raising of capital for his own council, would become nothing more than a magnificent but powerless refuse collector. Likewise, his councillors without the power of decision over financial priorities would become mere local dignataries and figureheads, without having the responsibility that local representative government now gives them. Finally, the large reservoir of talent that we have amongst our local treasurers would be diminished. Our local treasurers and accountants are highly qualified and highly experienced people. If I may say so, in passing, they are to some extent more qualified in this field than one or two of the gentlemen in the Treasury who were educated in classics at Balliol and King's.
I believe that the 1963 White Paper on local government borrowing was basically right in suggesting that, for the future, local authorities should continue to raise the majority of their capital in the open market, but under stricter control, and that the Public Works Loan Board should provide them with a rather greater measure of their requirements than it had hitherto done. In 1965–66, the Board contributed about £525 million net to total local government capital expenditure of £1,050 million net. I quote the net figures—I think that the Financial Secretary was quoting the gross figures. In 1966–67, the Board will contribute only £398 million net—about £485 million gross—which is about £125 million less in the current year.
I would not be hasty in criticising the Financial Secretary or the Government for reducing Government borrowing. This is a move in the right direction. If they reduce Government borrowing it is


perfectly logical that advances from the Public Works Loan Board need to be reduced as well. I only criticise the Government in one particular respect. It is the lack of foresight and help which is being given to treasurers throughout the country in raising the increased and additional amounts which they are now required to find on the open market.
This amount, I estimate from what the Financial Secretary said, to be well over £1,000 million. We are talking about cutting down something slightly over £100 million from the amount which will be forthcoming from the Public Works Loan Board, whereas there is £1,000 million plus to be raised in the market. The Government have clamped down tightly on the Public Works Loan Board and devices used by treasurers over the last few years to increase quota borrowing, but without giving further assistance to help them to raise it in the market.

Mr. O'Malley: Will the hon. Member extend that a little and say what kind of assistance he believes ought to be given?

Mr. Nott: Yes, I was about to make one or two suggestions for easing the problems which treasurers find as a result of the changes we are debating.
In doing so, I must declare my continuing interest in local government borrowing. It is a field in which I have been working to a minor extent over the last five years and I have a continuing interest in it. I played some small part in introducing with Manchester Corporation the negotiable bond—unfortunately now known as the yearling bond which is a misnomer for they can be from one to five years in life. This medium was introduced only two years ago and now finances about £150 million a year of local government capital expenditure. If the Financial Secretary would give consideration to relaxing the market in these negotiable bonds a little more he would have an extremely useful instrument to help treasurers now that they are forced further into the open market.
I suggest that the Treasury should allow treasurers to borrow by means of one-to five-year negotiable bonds up to 10 per cent. of their net outstanding debt. As the Financial Secretary will be aware, the present limit is £1 million for all local

authorities, whether they are tiny rural district councils with a net outstanding debt of £500,000, or Liverpool Corporation with a debt of £137 million. It is nonsensical that the same £1 million limit should be set both for a rural district council and for Liverpool, Birmingham and Manchester. I suggest a reform in this direction so that local authorities could borrow up to 10 per cent. of their outstanding debt.
Considering that local authorities are now being forced further than was expected on to the open market, we should give very close consideration to the effects which this will have on the management of sterling. It is not often appreciated that one of the principal reasons for the 1963 White Paper on local authority borrowing was the very serious effects which temporary borrowing by local authorities was having on the management of sterling. Before the last sterling crisis up to £500 million had been invested by non-residents from abroad in our public works.
These amounts were invested through the banking system in seven-day, one-month or three-month deposits. When the sterling crisis occurred a year to 18 months ago, the confidence in sterling of those overseas depositors was shaken and they withdrew their funds from the local authority market. This led to an enormous demand for local authority treasurers to replace the moneys withdrawn from this country and forced up interest rates in the local authority temporary money market with consequent effects upon the whole economy.
I should like to see a small change made in the foreign exchange regulations which would be highly beneficial to the whole country and to local authorities generally. At present, if a non-resident buys a security which has a life of over 364 days and sells it before it matures, he is credited with blocked sterling, whereas if he buys a Treasury Bill or a local authority bill which has under 364 days' life he is credited with external sterling.
The effect is that non-residents are reluctant to invest in one- to five-year local authority bonds and other local authority stocks. They know that if they sell they will have to bear the discount on blocked sterling. If we were to make a small change whereby they received,


instead of blocked sterling, external sterling, this would have advantageous results as it could attract more money from abroad to local authorities and might also fund some foreign deposits into longer bonds. The market would counteract withdrawals by falling prices to a greater extent than any discount on blocked sterling. Practically every other country in Europe sets out to attract foreign investment in its public works, hut this country by small foreign exchange anomalies discourages it.
Of course, we would all like to see this country have cheaper rates of interest for housing and services, but we cannot provide cheaper rates of interest if they contribute to increasing inflation and damage our economy. The way in which cheaper rates have been achieved in the last 18 months has been by a subsidy offered to local authorities through the Public Works Loan Board which, in the end, must be inflationary if it is carried too far. At present, quota loans through the Board of up to five years are bearing interest at 5⅝ per cent., which is practically the same as the Treasury bill rate and more than 1 per cent. above the rate at which the Government is borrowing for five-year securities.
A far better way of reducing rates of interest for local authorities, but by nothing like the same amount as a subsidy, would be as follows. If the Treasury and the Bank of England were to allow negotiable bonds which treasurers are using as a borrowing instrument to be eligible security at the Bank of England, that would immediately lead to a fall in interest rates to local authorities of at least ¼ per cent. I am aware that this would expand the credit base, but use more than a comparable issue of Treasury bills to finance the Public Works Loan Board.
The whole of the £150 million plus—it is a figure which is growing the whole time as local authority financial requirements increase—would certainly see a drop in the cost of interest by at least ¼ per cent. This would be achieved without any form of Government subsidy and with less damage to the economy through creating inflationary tendencies than occurs if subsidies are continued to be granted below market rates and when a two-tier interest rate structure is in operation.
This is a technical matter, but I do not apologise for raising it this morning. The lowering of interest rates by ¼ per cent. on £150 million, which is a fairly simple thing to do, is relevant to the problems we are discussing.
I believe, also, that if this were done the interest of small savers in these securities would be increased. What we must do to finance our public works is to provide some kind of medium for the small saver to invest in the town hall and to invest—but this is a different point—in the nationalised industries, so that they are protected against inflation. We have reached the position where, if he desires to protect himself against inflation, a small saver or investor buys a unit trust with an equity hedge. The demands for public sector finance are increasing year by year but without being able to draw on savings in the same way as the private sector.
It is only sensible that the Government should give consideration to protecting the small saver against inflation if he should wish to put small savings of £100 or £200 into the town hall. I therefore ask the Government to consider some form of bond indexed to the cost of living, although I am well aware that there are many important economic arguments against a form of indexed bond. I would only say that if such a bond could be introduced to a limited extent over the counter at town halls it would draw a great deal of savings into public works which are not now going into the public sector at all.

12.12 p.m.

Mr. Brian O'Malley: I want, first, to congratulate my hon. Friend the Member for Walthamstow, East (Mr. W. O. J. Robinson) on a lucid and confident maiden speech. We on this side know of his long experience in local government. We listened with interest to his review of the problems of his own local authority, which are common to many local authorities. I can assure my hon. Friend that he struck a sympathetic chord on this side of the House when he spoke of the impact of high interest rates on local authority rents and rates. We hope that my hon. Friend will join us in debates on local government and matters such as this in the future.
The hon. Lady the Member for Finchley (Mrs. Thatcher) made a speech in moderate terms. However, she expressed


concern at the impact on local authorities of high rates of interest. She complained about "interest-free loans" made by local authorities to the Government She said that high loan charges would have repercussions on the rates. She is quite right there. However, the record of hon. Members opposite in past years should be set against statements of that kind.
The hon. Lady said that she did not want to go beyond the 1963 White Paper This is not surprising. Mention has been made this morning of bringing Public Works Loans Bills forward at fairly frequent intervals so that matters of local authority finance can be discussed. It is worth remembering that after 1957 there was an interval of over six years before the next Public Works Loans Bill was introduced at the end of 1963.
When an assessment is being made of the present condition of local authority borrowing and the burden which local authorities have in servicing their debts, it should be remembered that it was the Tory Party which threw local authorities on to the open market in October, 1955 and left them there until March, 1964. Further, the Tories made the Loan Board a lender of last resort and a lender, not at the Government credit rate, but at the local authority credit rate, which was higher than the Government rate.
The Tories produced a queue in the market which resulted in extensive short-term borrowing, particularly after 1957, which the Radcliffe Committee said was forced on local authorities by the decisions of the central Government. The Tories forced local authorities on to the mortgage market because of the queue in the stock market. The main effect of those policies was to make borrowing by local authorities much more expensive than it need have been.
The Tory Government rejected the recommendations of the Radcliffe Committee. Mr. Heathcoat Amory, the then Conservative Chancellor, told the House that the queue was orderly and that, while local authorities were waiting their place in the queue, they could go on to the short-term money market. We all know what the effect of so doing was.
The Report of the Radcliffe Committee was debated in 1960, but it was not

until October, 1963, that the White Paper was brought forward giving proposals for a change in the system of local authority borrowing. It is obvious from reading that White Paper and the subsequent debates that the purpose of the White Paper was not particularly to help local authorities. It was because the Government found that, because of their policies, they had placed our external position in a degree of jeopardy in which it never need have been.
When the Public Works Loans Bill of 1963 was given a Second Reading, not one Tory Member from England. Scotland or Wales was interested enough to speak in the debate. The then Economic Secretary to the Treasury, in moving the Second Reading, emphasised that the Bill was being introduced and changes were being made in the pattern and procedure for local authority borrowing because of the Treasury's fears of a growing short-term debt. There is no evidence in the then Economic Secretary's speech that the Treasury was considering the very real burden being thrown on to local authorities and local authority rates at that time.
It is well to bear in mind the very real help which the Labour Government have given to local authorities in the last two years, in spite of all the economic difficulties and the dangerous external situation with which we have been faced.

Mr. Nott: Is not the hon. Gentleman aware that it was the White Paper which was produced by the Conservative Government which suggested greater access, going up to 50 per cent., for local authorities to the Public Works Loan Board? It is the present Government who are suggesting that it should not go up to 40 per cent. but should be kept back at 30 per cent.

Mr. O'Malley: Of course I am aware of it. What I am saving is that the Conservative Government rejected the recommendations of the Radcliffe Committee in 1960. It took them three years to make up their minds that they would do anything, and, when they did, it was what the then Economic Secretary described as a compromise proposal. The present Government are not only continuing the recommendations of the White Paper but in some respects, in


terms of the regions, for example, they have gone further.
I think that my hon. and learned Friend the Financial Secretary mentioned the special assistance for the regions. He mentioned that the first £100,000 of local authority borrowing could be taken at the quota rate. I know that this was recommended in the White Paper, but there is a very great difference between making recommendations and suggestions in a White Paper and implementing them when economic conditions change.
The country has taken well the argument as to whose was the responsibility for the kind of economic situation with which the Government were faced when they took office in October, 1964. In addition to the special assistance in the regions, the raising of the £50,000 limit to a limit of £100,000, which probably cost about £30 million in a year of economic difficulties, it should also be noticed that after the Bank Rate increase in the economic crisis after October, 1964, the Chancellor helped the local authorities by fixing a rate for quota loans the result of which was that the differential between the quota rate and the last resort rate widened.
It should also be remembered in this context—I do not want to go beyond the bounds of order, Mr. Speaker—that the General Grant (Increase) Order of December, 1965, was intended to help inter alia the increased cost of servicing loans and the increased cost of the debt of local authorities. In passing, one should in this context mention the rate rebate system that we have introduced, the Housing Subsidies Bill of last Session, and the proposals of the Government for short and medium term help to the local authorities as laid down in the White Paper of February, 1966.
Having said that about the Opposition, I think that I am then entitled to make some comments about the situation with which the local authorities are now faced as a result of more recent Government policy. I believe that everyone on these benches is disappointed that we are not to move forward from the 30 per cent. quota rate to 40 per cent. I believe that we are all disappointed at the restriction of the basis of assessing that quota so that the sum borrowed for the previous year shall not count in the calculated

quota. I welcome this aspect of the Government's announcement in so far as it will cut the amount of short-term borrowing, because I believe this is one of the most dangerous features of local finance at the moment; but to the extent that it cuts the amount of quota borrowing which the local authorities will be able to make in the coming year—we understand this will be within the range of about £100 million to £180 million—obviously all of us, thinking about the position of our own local authorities, are disappointed at this situation.
We listened with some pleasure when the Financial Secretary said that the formula of the White Paper had not been disregarded, and I think that the implication is clear that it is because of the economic and financial circumstances., and I would imagine because of a number of external factors, that the Government have found themselves in a position where they have had to maintain or increase the 30 per cent. quota for this year.
In examining this problem we should have a threefold aim in determining how local authority capital expenditure and debt servicing should be financed. First of all, the money should be raised at as cheap a rate as possible and in the most efficient manner possible. Secondly, local authorities should finance their expenditure on sound principles of monetary management. I do not regard the present state of the short-term unsecured borrowings of many of the local authorities as conforming to those sound principles. I believe that the third aim—since we are considering such large and increasingly large sums of money—should be that the Government should maximise their influence over the timing and nature of monetary movements with a view to safeguarding our external position and controlling the demand on the markets.
With those three aims in mind all of us must be in some degree worried at the present situation. I think that the first thing about which the Treasury must obviously be concerned is the amount of short-term debt. In 1963, we were told that it was about 15 per cent. of the total debt of the local authorities. I remember very well my hon. Friend who is now the Minister of Defence for the


Army saying that he believed that one result of the White Paper would be that within the next two years, after 1963, there would be an increase in the short-term debt, and, in fact, this is precisely what has happened. On the figures that I have seen, I understand that at 31st March last year the short-term debt was running at £825 million, which is 18·3 per cent. of the total debt of the local authorities.
The hon. Member for Finchley said, I believe, that there was a tendency for long-term local authority borrowing to shorten and for short-term local authority borrowing to lengthen. I hope this is right, but on the figures which I have I do not see any indication that the second part of her proposition is true. In fact, if I have taken the statistics accurately, as I understand it, at 31st March, 1965, there were £1,141 million of seven-day debt. By the end of 1965 that had risen to £1,257 million of seven day debt, whereas the amount of borrowing taken under three months terms and over seven days had fallen somewhat.
I was pleased when the Financial Secretary said that the percentage of the total debt of local authorities which was new short-term debt had fallen to 16·25 per cent. but I do not think he said what was the actual figure. This is the worrying feature of the situation, that even if one knocks that down to below 20 per cent. or even below 15 per cent., because of the increasing activities of the local authorities in the market the global sum will increase as the years go on, and I think that this presents a very real threat to our system of monetary management.
The Financial Secretary said on 26th July last year that a number of local authorities had got short-term debts of over 20 per cent., and he added:
The real objective is to get them down."—[OFFICIAL REPORT, 26th July, 1965; Vol. 717, c. 170.]
With respect, this is not the real objective of these operations. The principles of sound monetary management by the local authorities constitutes only a very small part of the problem. We have to look at it from a much wider point of view than that.
There are a number of dangers and objections to the present amount of short-term debt incurred by local authorities. First, the rates paid by the local authorities are above the Treasury bill rates, and we on this side of the House complained for years when we were in opposition that we wanted to see cheaper rates of interest for local authorities for all the socially desirable purposes for which local authorities cater.
The second objection, if I understand the situation aright, is that the large amount of short-term local authority paper affects the market for central Government bonds, and obviously affects monetary conditions generally. The hon. Member for Louth (Sir C. Osborne), who is no longer present, asked the Financial Secretary what would be the likely impact on interest rates if the Government raised much more money from Treasury bills. My view is that, if there were a drastic cutting-down of the amount of short-term and longer-term borrowing by the local authorities in the money markets, it would make it easier for the issuing of Treasury bills by the Government.
The third principal objection to the short-term debt is that it is a dangerous chink in our financial armour. I need not enlarge on that, because the hon. Member for St. Ives (Mr. Nott) did so only a few minutes ago and set out the situation very effectively and accurately. The danger is that we know very little about this money. Both when the Opposition were in power and in the debates last year, when Questions were asked, by, for example, my right hon. Friend the present Minister without Portfolio, as to how much of this money was foreign money, all we could be told was that at one period £160 million of it came through foreign banks, but we did not know what proportion of it was foreign money coming through English banks and other sources in this country. Therefore, if it is true, as Front Bench spokesmen have said over a period, that one cannot find out with accuracy where this money comes from, I think it essential to cut that amount of short-term borrowing as quickly and as drastically as possible.
The fourth objection to the local authorities having a large amount of short-term debt is that the Government


need to influence interest rates in the fields where foreign funds are substantially attracted. The evidence, certainly in recent years, is that this is one field in which foreign funds have been substantially attracted. Therefore, to the extent that the new restrictions, announced by the Financial Secretary this morning and made clear in the White Paper a few weeks ago, on refinancing 365-day loans through the quota will prevent or hold down short-term borrowing, I welcome them. It is an interesting reflection on the new policy that in nearly £3 million of issues of recent bonds there have been no yearling bonds at all; they have been for two or three years.
On the other hand—we have a responsibility to look at the position of the local authorities here—one of the side effects of the tighter restrictions of the Public Works Loan Board has been that short-term money rates have been hardening. The seven-day, three-month and six-month rates have all hardened. Therefore, one effect of this tightening up and of the new regulations is that local authorities are likely to have to pay more for their short-term money than in the past.
I turn next to the problem of longer-term market borrowing. Once again, this is more expensive for the local authorities than getting money at the Government credit rate, and I believe that it is still useful to turn back to the recommendations of the Radcliffe Committee on this subject, which pointed out that, considering the large and growing sums of money involved, from the point of view of monetary control it was preferable that the timing should be entirely at the discretion of the central Government.
The Committee went on to say that the fragmentation implied by independent borrowing involved unnecessary cost
in that the lower marketability of small issues has to be paid for in a yield differential which, if they borrowed from the Exchequer via the Public Works Loan Board, could be avoided.
In my view, when a local authority has received loan sanction from the Government for capital expenditure, the Government have expressed the opinion that this expenditure is socially desirable. Therefore, I begin from the

premise that one should attempt to provide the local authorities with money at the cheapest rates of interest possible within the economic circumstances of the time. Therefore, I believe, first, that the Public Works Loan Board should in principle provide the bulk of the long-term capital of the local authorities. Here I differ from the hon. Member for St. Ives, because I do not consider that this is a question of independence, although I shall in a few minutes have a comment to make on what he said about it.
Secondly, what we should be aiming for in principle and in the longer-term taking into account possible economic and financial fluctuations, is that the Public Works Loan Board should eventually provide, perhaps, 75 or 80 per cent. of the money for local authority capital expenditure, which would still give the local authorities scope to raise locally money which might not otherwise find its way into the gilt-edged market.
Thirdly, the short-term borrowing should essentially be bridging finance and no more than that.
I stress that I am putting these propositions to the Government in principle, fully realising the economic difficulties and financial implications of any steps which they might take at this time, but, in putting them to the Government, I point out that it makes little difference whether the Public Works Loan Board or the Government raise the money or whether the local authorities raise part of it on the market because the total pressure on resources is the same. On 6th April last year, when talking of giving help to the regions and saying that it would cost about £40 million, the Chancellor of the Exchequer said:
This is money which the local authorities would otherwise have had to borrow on the market, and the change does not, therefore, make new demands on our resources."—[OFFICIAL REPORT, 6th April, 1965; Vol. 710, c. 283.]
If one were to have this large-scale switch over a period from the local authorities raising money on the open market to a situation in which the Government raised the money, it would actually help the Treasury bill rate, contrary to what the hon. Member for Louth has suggested. One argument against this, that an increase of Treasury


bills would make the position of the banks more liquid, is acceptable only in limited terms, and I should have thought that this situation could be controlled in other ways.
In principle, I would like the Public Works Loan Board to issue the bulk of the money which local authorities need for their capital expenditure and for the servicing of their debt. I recognise that there are problems. I recognise, first, the problem that, from the standpoint of central monetary management, the Exchequer would need a period for switching. This was the reason why the White Paper suggested having 20 per cent. one year, then going to 30, 40 and up to 50 per cent. One accepts the need for time for switching.
I accept, also—I have a great respect for the judgment of my right hon. Friend the Chancellor—that there may well be external considerations which make it necessary to restrict the quota level to 30 per cent. this year. I hope that this situation will be short-term. We are aware that there will be a large increase in the amount of public investment on the social infrastructure by 1970. I do not want to see the local authorities being thrown on to the open market for this vastly increased sum for various reasons, for instance, the danger of the short-term debt as well as the fact that it is more expensive for the local authorities.
Therefore, while accepting the Government's judgment, as I think we must, in restricting the quota percentage to 30 this year, I hope that the Financial Secretary will at least consider not only that we should eventually go to 50 per cent. but that we should go well beyond that. I remind my hon. and learned Friend that this was described by the Opposition as a compromise solution when the White Paper was produced. What is acceptable to the Opposition as a compromise solution is not likely to be acceptable to many of us on these benches, or, for that matter, to my hon. and right hon. Friends who are now members of the Government.
In the comments made during past debates on this subject by several members of this Government, both senior and junior, we were told that the 1963

proposals were very modest and that we ought to go further and further liberalise the system. I believe that there is a body of opinion within this party which believes that the Public Works Loan Board should be supplying most of the money for local authorities. I hope that the Financial Secretary will consider this.
Lastly, I believe that in the raising of this money and in the distribution of these loans to local authorities there is a great need for the streamlining of Exchequer lending arrangements and the Parliamentary scrutiny of those arrangements. It is notable that we not only have local authority borrowing from the Public Works Loan Board through the Exchequer, but we also have large amounts of borrowing by the nationalised industries. There we have a number of borrowing Acts which provide for the expected requirements of the nationalised industries for between four and seven years, divided into two parts by an intermediate limit which may not be exceeded without an affirmative Resolution of the House of Commons.
I look forward to the day when we can have a bringing together of these lending arrangements by the Treasury so that the whole of public expenditure of this type in terms of loans to publicly owned industries and the municipal authorities will be brought together. I should like to see, to succeed the present organisations, a body of "Industrial and Social Investment Commissioners" to act on behalf of the Ministries and replace the very untidy and in many ways illogical and unsatisfactory situation that we have at the moment.

12.42 p.m.

Mr. R. B. Cant: I suppose that it is the fate of all later speakers to find their speeches decimated as time goes on. As this is only my second contribution in this Chamber, I am not sure how capable I am of dealing with this crisis.
The first point that I wish to make is a slightly technical one. Might we know whether there is or is not a loophole in the Bill? I do not claim any originality in this respect, but I was interested, in reading the City columns of one of our great journals of opinion which may not thunder quite as much


as it used to, to learn that the consequence of the regulation which has been published by the Public Works Loan Board may be damage for local authority finance in ways only now being foreseen.
The point at issue is fairly clear, that if an authority borrows money in the month of April in year A and repays it, say, 13 months later, in year B, it is not eligible for quota. But if the city treasurer is sufficiently farsighted to borrow the money a few days before 31st March and repay it a few days after 1st April in the next year but one, it can attract quota.
If this is a loophole, obviously many of the more astute treasurers, not of rural districts but of the great cities perhaps, will manage to increase the burden of the borrowings from the Exchequer. If this is also true, it will mean that local authorities will find that they will have to pay a premium rate for any short-term borrowing that they make in the second half of, say, March each year. I should very much like to know what the answer to this is in both respects because I think that this will be of some importance to local authorities.
My second point has already been made very eloquently by my hon. Friend the Member for Rotherham (Mr. O'Malley). Here I speak in support of the general argument for the financing of the services provided by local authorities through money provided by the Public Works Loan Board. The hon. Member for St. Ives (Mr. Nott) argued very forcibly in terms of principle against this. He said that it would make local treasurers much more unenterprising than they had been before and that it would create in the whole field of local government finance a sense of atrophy akin to a loss of independence.
I think that it is true that in the last few years of riotous Tory living in the field of finance city treasurers have become quite different beings. Whereas they used to deal in bonds and gilt-edged securities, they have been forced into all sorts of areas of activity which previously they might not have regarded as being altogether respectable. They have had to acquaint themselves with the terrible business of city centre development, property deals, and so on. They

have had to make a nodding acquaintance with equities in relation to their superannuation funds.
In respect of the sort of finance that we are talking about today they have had to widen their experience in most peculiar ways. They have had to understand that if they wanted money they might have to get it from the workingmen's club round the corner, which was much more prosperous than the local authority. They have had to understand that their facilities for borrowing money would probably be a function, in terms of both amount and the interest that they would have to pay, of such things as the state of the United States balance of payments. This is very important. It has added to their experience, and one would never like to put them in a straitjacket in future.
While one must attach importance to experience, one must, I think, regard the sums involved here and the objectives which they are intended to finance as a public service. This is an area of activity which is just as entitled to public money as central Government expenditure—even the payment of our salaries, and such things as nationalised industries. It is interesting to go back to 1955–56 and ask why the local authorities were so unceremoniously thrown out of the Budget and the nationalised industries were brought in. It was because the Government felt that they could control the nationalised industries more easily within the Budget than if they left them outside and that, in any case, they could trust local authorities if they put them into the market. This has not proved to be altogether true.
The hon. Member for St. Ives said that in principle he was against this because he felt that no public authority should wholly finance local government. Then he began to erect a series of controls, both internal and external, which we on this side of the House would suggest was similar in spirit to providing the money from Budget funds in any cases. What we have created is an intolerable situation. Not only have we created a situation in which the interest rate problem has become absolutely out of hand, but we have created a situation in which the problems produced for the monetary managers in this country are much more serious in this situation in


which local government finance is outside the Budget than they could possibly be if it were inside it.
We have created a situation in which we have an enormous amount of borrowing which is completely insensitive to interest rates at all. We have created a situation in which we have produced a volume of liquid assets which makes monetary policy extremely difficult of achievement. Indeed, we have created a situation in which our balance-of-payments problems are very much increased as a result of this.
I should like to say more about that, but I will merely make a plea for some rationalisation of this jungle of local authority finance. If the Conservatives put the local authorities out of the Budget, we hope that the present Government will put them back into the Budget. No doubt my right hon. Friend the Chancellor will say that this cannot be done because his net borrowing requirements would be such as not to recommend themselves to the gnomes of Zurich or the financial gentlemen abroad. We must take their feelings into account. They rule our destiny. But these are people who are not educated in the true milk of the Keynesian doctrine, and they need to be so educated.
We have an outrageous Budget system, which the present Chancellor, fortunately, is putting right, although he has not gone far enough. If we could educate our foreign financial masters to appreciate that we have certain conventional Budget items dealing with current account but that we have below the line a capital Budget which is related not to prodigality or to spendthrift expenditure, but to the creation of assets in terms of the nationalised industries or local authority services, they would more fully accept the fact that a net borrowing requirement is not a true index of financial prodigality or prudence.
I hope that the Chancellor will bring the Public Works Loan Board's operations back into the Budget and that he will be a little more realistic about the Budget. I hope that he will do what my hon. Friend implied, if he did not actually say it—make the Treasury bill market available to local authorities. It is an outrage that local authorities are the only major institutions in the

country without access to this important area of finance. What is good for the Prudential is good for the local authorities. I hope that that point will be borne in mind, too.

12.53 p.m.

Mr. David Winnick: I welcome the Bill, as far as it goes, and, to the extent that it will make it easier for local authorities to borrow from the Public Works Loan Board, I, like other hon. Members, give an enthusiastic welcome to the Bill. I should also like to join in the tribute to the work which is done by borough treasurers throughout the country. Sometimes we tend to take borough treasurers for granted. We do not seem to appreciate the tremendous strain which their everyday working imposes on them, certainly if they are borough treasurers of very large local authorities. I know from my own experience as a member of a local council the amount of work which borough treasurers do and their contribution to a local community.
It is a feeling which I have expressed in speeches outside the House over a period of years that when local councils undertake essential work, they should not be penalised by the way in which they have to raise money. It has always seemed to me to be wrong—and this view is shared by all my hon. Friends—that local authorities have to go on the open money market for most of their loans, and I have always felt that local councils should be able to approach the Public Works Loan Board.
When I began my speech I said that I welcomed the Bill to the extent that it will allow local authorities to approach the Board. But what disturbs me, as it must disturb my hon. Friends, is that there is no increase in the quota laying down the extent to which local authorities will be able to borrow from a Government agency, the Board.
I listened with much interest to the speech of the hon. Lady the Member for Finchley (Mrs. Thatcher). Although I agree with some of her comments—and I nodded assent while she was speaking—I must point out to her that during the period that the Conservatives were in office local authorities were certainly not in a more favourable position with local government finance. To a very large


extent they were in a far worse position. It is only right and proper that we should say that local government is able to carry on its finances in a much more favourable way under this Government than under the previous Conservative Administration.
We must not get away from the essential point that under the terms of the Bill local councils will still have to go on the open money market to borrow most of their money. I hope that when the Financial Secretary replies to the debate he will show that he recognises that there is a great deal of impatience among his hon. Friends for some improvement in the present position. I hope that I shall not be taken to task for criticising a Minister of my own Government, but perhaps I detected a slight note of complacency when the Financial Secretary made his opening speech.
I recognise the very serious economic position which the country is in. It may well be argued that at the moment there is no alternative to the present arrangement as set out in the Bill, but the Government should accept that there is a great deal of impatience on this side of the House among hon. Members who feel that local councils should be able to borrow far more from the Public Works Loan Board than the amount set out in the Bill.
There is no doubt that in the years ahead, and despite plenty of restrictions, local councils will have to find more and more money. One hon. Member opposite argued that it would be wrong for local councils to be able to borrow an immense amount of money from a Government agency. He argued that it would be wrong because it would be a form of central Government control. That argument makes little impact on me. After all, before local councils are in a position to borrow, they have to get loan approval from the Government. Surely this is a form of central Government dictation.
How many local councils can go ahead and borrow money from the Public Works Loan Board or on the open market without loan sanction approval from a Government agency? It is rather silly for hon. Members opposite—there do not seem to be many present at the moment—to argue that it would mean central dictation from the central Government when to a large extent we already have central control by the Government.
This should be recognised by hon. Members opposite.
If I may make a local point, it should be said that in certain areas of the country local councils are faced with a need to increase council rents by very substantial amounts as a result of the manner in which money is borrowed on the open market. For example, in Croydon, rents have recently gone up by over £1 per week. The hon. Member for Waltham-stow, East (Mr. W. O. J. Robinson), who made an excellent speech, said that in his borough the local council had decided to phase these increases. In the constituency which I represent, the local council decided to slam on an increase of over £1 a week in council rents without any phasing and in one go. There has been a great deal of hitter resentment in Croydon among council tenants at the way in which these increases have been imposed, and I have tabled various Questions in the House.
Local councils should not be penalised when they undertake essential community development such as housing, education, the provision of essential amenities. Two subjects arise—the way in which to raise the money, which is the subject of the debate, and interest rates, which it would be out of order to discuss now. The mechanics of raising money by local authorities is a very important issue and is the reason why I shall listen with keen interest to the Government's reply to the debate.
There is a great need for a complete change in local government finance, which is now completely chaotic. I can see no justification for the way in which it has been organised for the last 500 years, although I cannot pursue that subject now. However, I hope that over the time of this Parliament we will have an opportunity to debate local government finance and to put forward our views, as the Government will be able to put forward theirs, on how to change the present chaotic system to a fairer way of raising money for local purposes.

1.0 p.m.

Mr. Peter Hordern: I am sure that the whole House would like to congratulate the hon. Member for Walthamstow, East (Mr. W. O. J. Robinson) on his admirable maiden speech. We on this side of the House


naturally welcomed his glowing tribute to his predecessor, Mr. John Harvey. Mr. Harvey will be remembered on this side of the House certainly, and, I think, throughout the House, with great affection and admiration.
The hon. Gentleman spoke of the housing problems in his constituency and the House will have noted with interest that those housing problems are being solved in some way by removing some of the constituency's more eminent residents into the new quarters of the Ministry of Defence at the Admiralty. The hon. Gentleman argued for cheaper interest rates for local authorities, which has been the constant theme throughout the debate from hon. Members opposite, as in every debate in the last two years on the Public Works Loans Bills.
My hon. Friend the Member for St. Ives (Mr. Nott) spoke very fluently and with obvious technical knowledge about the marketing of short-term local authority bills and contributed a great deal of expert knowledge to the debate. I sometimes feel that it is with the entry of people of the calibre of my hon. Friend, combining business experience and knowledge with their duties to the House, which altogether knocks the argument that the sittings of the House should be held as a whole day operation. My hon. Friend's contribution was admirably lucid and to the point and I am certain that the House took his point about the independence of local authorities and their importance.
The hon. Member for Rotherham (Mr. O'Malley) indulged in an interesting historical survey. He will forgive me if I do not comment on some of his rather contentious remarks. He spoke more like a Socialist politician until we suddenly came to the last eighteen months, when he began to talk in terms of a banker. The expressions he was using seemed to change markedly and the whole tone of his speech altered.
He expressed disquiet, as have other hon. Members, about the type and extent of short-term borrowing. He made a short reference to his hon. Friend the Member for Islington, North (Mr. Reynolds). He may recall that in the corresponding debate last year the hon. Gentleman was recommending completely

free access to the Public Works Loans Board for housing.

Mr. O'Malley: I was referring not to my hon. Friend the Member for Islington, North (Mr. Reynolds) but to my right hon. Friend the Member for Sowerby (Mr. Houghton), the present Minister without Portfolio.

Mr. Hordern: I cannot recall what the hon. Gentleman said about his right hon. Friend, but certainly the hon. Member for Islington, North in the debate last year urged completely free access to the Board for housing, and I did not notice that kind of remarking coming from the Government side during this debate.
The hon. Member for Stoke-on-Trent, Central (Mr. Cant) referred to the issuing of local authority bills. There was a movement among local authorities last year for local authority bills to be issued and it was said that they were guaranteed a warm welcome in the City. The Radcliffe Report dealt with this matter carefully and cogently, the point being that if local authorities are allowed to issue their own bills, the clearing bank systems would be allowed to count local authority bills as part of their portfolios, and thus the Government's ability to have an effect on and to control total expenditure to that extent would be nullified.
The hon. Member for Croydon, South (Mr. Winnick) strongly criticised the limitation of the quota. The criticism of hon. Members opposite in previous years has always been that the interest rate charged by the Board was too high and they have argued for a differential rate. This is a very old argument. It was Francis Bacon who, more than 300 years ago, said that there was a very strong argument for differentiating interest rates—one rate for Bacon and other rates for everybody else. I believe that the Government have become far more responsible, in terms of action rather than talk, since they have been in power on interest rates in general, obviously for reasons not all of which have been within their control.
When the Financial Secretary introduced the last Public Works Loans Bill in July, he said that he expected the £500 million then to be provided to last well into next year. It is difficult to know whether at that time he meant the


calendar year or the financial year, but we have not got very far into this financial year yet and he is asking for another £900 million. It is reasonable to ask how long he expects it will last this time. I think that he said that it might last until the middle of next year.
I do not know how he can work out just how long it will last, because these matters are not capable of precise estimates. The estimated net cost to the Board last year was supposed to be £360 million, but the outturn was £525 million, or about 30 per cent. out. The estimate for this year is £398 million. One cannot help but admire the precision with which the Treasury makes these estimates within £1 million. It is rather like the racing tipster giving not just the first three horses, but the first six and the distance between each. I think that these figures should be regarded with precisely the same amount of suspicion as one would regard the racing tipster.
The fact is that this estimate is just as likely as the estimate of time to be as much a shot in the dark this year as last. It is therefore interesting to review the course of events of the past year and to see see whether it is possible to draw any conclusions about this year's Bill. During the course of Second Reading last year, on 19th July, the Financial Secretary said that local authority temporary debt was 19 per cent. of total local authority debt as at 31st March.
He did not know, he said, what proportion of the debt came from abroad. He must have known that it was a pretty high proportion, because he must have observed the effect of the massive withdrawal of funds during the months of the sterling crisis. I can well remember during that period local authorities paying 8 per cent. to 9 per cent. for seven-day money. On one occasion that I can recall local authorites were offering up to 12 per cent. and 13 per cent. for overnight money. That was the position during the sterling crisis. Certainly the effect was that of the total estimate of £360 million net for the whole year no less than £157 million was drawn from the Board in the first 10 weeks of the year.
This is where the effect of the sterling crisis was felt—not just on the country's monetary reserves but in the coffers of the town halls. So many of the activities

of the town halls are necessarily longer-term activities, ranging from housing to drainage, and these activities were being financed short-term by foreign funds, as the hon. Member for Rotherham, has said. The Government's mishandling of the economy which led to the crisis of confidence had an immediate reaction on the local authorities.

Mr. O'Malley: Presumably, even if one accepted the hon. Gentleman's arguments about the mishandling of the economy, he would accept that there was similar mishandling in 1957 when the same thing happened?

Mr. Hordern: I am not denying that there was a sterling crisis in 1957. What I am saying is that this crisis, if one wants to indulge in crises, was very much more severe. I do not think that we shall get very far, or be in order if we discussed sterling crises.
It was to control the economy more effectively that the Conservative Government introduced the Public Works Loans Bill of 1963. The method in the Bill was to induce local authorities to borrow for longer periods by giving them access to the Board in increasing proportions each year and at the same time to reduce their ratio of short to longer term borrowings to 20 per cent. over four years. One dreads to think what would have happened to local authorities if money from the Public Works Loan Board had not been forthcoming during last year's crisis. Despite the success of this salvaging operation and the fact that the Chancellor, in his Budget speech, said that he adhered to the general principles of the 1963 White Paper, the truth is that the understanding of the rules has now been changed. Instead of 40 per cent., local authorities are only being allowed access to 30 per cent.
Why is this? Is it because the calls on the 30 per cent. rate are too heavy? I should imagine that that is true, but surely it is monstrous to change the rules or the understanding of the rules which local authorities had because of the Government's own ineptitude. This is what has happened. I am aware that some authorities have made full use of the provision under which a yearling bond or a one-year loan could be counted as the basis of a 10-year loan from the Public Works Loan Board and renew that loan to get further access. I can see no cure


for this situation in the new Regulations. There is nothing to prevent a local authority which wishes to do so from issuing a 13-month loan at 31st March next and, when that loan runs out, being eligible for its quota from the Board. I do not think that that Regulation is effective, except in so far as it has prevented local authorities borrowing from the Board at less than two-yearly periods. It is unlikely to be effective upon those few authorities which are borrowing quite rightly and legally as much money as they are entitled to do.
There would appear to be three possible reasons why access at 40 per cent. is to be denied: first, because of the run on the £ and secondly because of the cost of subsidising the special rate of interest which the Public Works Loan Board has, of 5⅞ per cent. A third possible reason is because some local authorities make full use of the provisions, to which they are perfectly properly and legally entitled. The Government are forcing the great majority of local authorities into borrowing from the market when they could reasonably have anticipated getting their quota cheaply at 40 per cent. I wonder if the Government have worked out what the likely effect of this change in the rules will be. First of all, there is bound to be an enormous strain on the capital market in any case. This will be aggravated by the increase in the loan sanctions allowed for this year.
I understand that loan sanctions amounting to £1,351 million were approved in 1964–65 and that the figure for this year which has finished was £1,533 million which represents an increase of 13·4 per cent. I wonder if the Chancellor has taken the effect on the short market of these extra borrowing requirements. Last year the ratio of short- to long-term debt was 16·3 per cent. I wonder what it is now. Perhaps the Financial Secretary could give us more recent information? There seems to be plenty of scope for increase from this proportion of 16·3 per cent. to the 20 per cent. which local authorities are allowed to borrow short-term overall. It seems to us that the Government are encouraging authorities to borrow short in order to lend long—the classic prescription for bankruptcy. If there is

any strain on the £ in future months, which we devoutly hope there will not be, the Chancellor's ability to control the economy has been quite sharply reduced.
I hope that he is not being too optimistic in his latest Budget cuts, for, although it is true that he has reduced the total borrowing requirements from £576 million to £287 million, he is relying upon savings to cover the deficit. It is worth making a point that withdrawals exceeded deposits last year in savings by £65 million. The whole House hopes that the new National Savings Certificates will be successful in covering this deficit, but it is by no means certain and we cannot rely upon it.
The Chancellor's task is not made any easier by the higher interest rates prevailing in other countries. Some years ago, when Bank Rate was raised to 7 per cent., this was regarded as a very effective weapon because there was a very considerable disparity between that rate and rates being applied in other countries. But during the last two years Bank Rates have been increased in the United States, Belgium, France, Italy. Holland and Germany. Thus, the flow of funds from one country to another has been nullified. Throughout the world there is an overall hunger for capital, partly based on shortage of international liquidity and partly upon the fact that there is full employment in industrialised countries.
If one adds to these general difficulties that the Chancellor is in on interest rates, the particular pressures on fixed-interest borrowing caused by Government action, the position is very much worse. There was the effect in the Budget of last year, of Corporation Tax, which meant that industrial companies started to issue debentures instead of ordinary shares. There is the effect of the competition of short-term and medium-term funds created by the new National Savings Certificates. There is also the future potential increase in the printing of money due to the steel nationalisation Bill and the pressure for higher building society rates.
All of these issues have a bearing on what is already a weak and over-strained gilt-edged market. One has only to look at the recent issue of the Surrey County Council stock, which is yielding over 7 per cent. on an eight-year loan. We


have an ever-increasing demand for funds, higher interest rates and a weak gilt-edged market. I wonder whether the Government, even now, appreciate the full extent of its problem. Just over 10 years ago the proportion of short to long-term debts of local authorities was 3½ per cent. It is now 16·3 per cent. on the latest figures which I have. In March of last year the total of short-term debt was some £1,600 million. By December, nine months later, the figure was £1,740 million.
I wonder whether the Financial Secretary can tell us what the latest figure is. All the signs are that local authority expenditure will climb ever higher. We are not objecting to this; we are just making the observation. We have the evidence of an increase of loan sanctions of 13·4 per cent. this year. We have also the forecasts of the National Plan, according to which investment in housing will rise by 33 per cent. between 1964–65 and 1969–70 from £519 million to £691 million. However little confidence one has in predictions in the National Plan, what we must consider is the trend of future public expenditure.
In addition, we have to estimate the cost of making schools into comprehensive schools and the cost of direct building. Three years ago the total of local authority expenditure was one-seventh of the total capital expenditure in the country. On the latest figures which I have, it is very nearly one-fifth of total capital expenditure. The plain fact is that the longer production remains stagnant, as it does today, the more local authorities and Government expenditure will eat into our productive resources. This is inevitable. We are not concerned in this debate with whether this is a healthy trend. All I can say is that without an increase in productivity, which we are not getting at the moment, we cannot continue at this rate of public and social expenditure without seriously affecting our future industrial development and our economic position.
We are, however, vitally concerned in this Bill with the financing of this rapid development. It certainly will not be financed through savings. There remains only borrowing or taxation. Understandably, perhaps, from the Government's point of view, the Government do

not want to come to the aid of the Public Works Loan Board quite as quickly as they did last year, or to the same extent. But I should like to ask the Financial Secretary what was the cost to the Exchequer of holding the Public Works Loan Board rate at 5⅞ per cent. on its 10-year lending. As the hon. and learned Gentleman knows very well, the Government cannot possibly borrow for that period of time at under 6½ per cent. The cost therefore must be very considerable.
The hon. and learned Gentleman will recall that in the 1963 White Paper the aim was to hold the interest rate offered by the Board at the Government's own rate, or very near it. The House should be told why this plan has been changed and what it will cost. It is our contention on this side of the House that local authority borrowing has grown and is growing, and ought to bear some relation to the growth of national productivity. It seems to us that the Government are not prepared to face the consequences of their own social legislation. They are flying in the face, not only of their own 1963 White Paper, but of the Radcliffe Report. This has grave implications for the management of the economy and indeed for the strength of sterling.
We therefore hope that the Government will increase the local authorities' access to the Public Works Loan Board as laid down in our White Paper and get, at the same time, better control of local authority expenditure. I know that whenever anybody mentions control of Government or local authority expenditure, hon. Members opposite become very suspicious, but I believe that there is a strong case for the creation of a Public Accounts Committee to examine local authority expenditure. I am not talking about loan sanctions. There is a strong case for examining how that money is spent to see whether there is a great deal of waste, as I am convinced there is.

Mr. Winnick: I referred to this point in an intervention in the speech of the hon. Lady the Member for Finchley (Mrs. Thatcher). Again there seems to be the same implication. Is the hon. Gentleman suggesting that less money should be spent by local councils on housing, education and basic amenities? It seems that this is precisely what hon. Members opposite want.

Mr. Hordern: I hesitate to say so, but I think that the hon. Gentleman is out of order. If he is not, I should like to answer his intervention. We are all for increasing public and local authority expenditure, provided that the country can afford it and the provision of these essential benefits is not made at the expense of industrial growth, which is absolutely vital to the country's future.
It is in the belief that the objectives which I have mentioned are possible under the Bill that we on this side of the House are prepared to give it our support.

1.25 p.m.

Mr. MacDermot: With your leave, Mr. Deputy Speaker, and that of the House, I should like to reply to some of the points raised in the debate.
First, it is my very pleasant task to congratulate my hon. Friend the Member for Walthamstow, East (Mr. W. O. J. Robinson) on his maiden speech. He spoke with great charm and obvious knowledge about his own constituency. He brought to the debate an experience which is the result of a very long and distinguished period of service in local government. I will come to the main point of his speech later.
It is also pleasant for me to welcome and congratulate the hon. Member for Horsham (Mr. Hordern) on his first speech from the Opposition Front Bench. It is a curious coincidence, but I think I am right in saying that I had the pleasure of congratulating the hon. Member on his maiden speech. It is somewhat unusual that I should find myself congratulating him again. We have one thing in common which we share with one other hon. Member. We both went to a school in Australia to which a rather distinguished pupil went recently.
Before I turn to the questions which I was asked by the hon. Lady the Member for Finchley (Mrs. Thatcher), I should like to deal with the intervention of the hon. Member for Oswestry (Mr. Biffen). He asked me to state in percentage terms what would be the increase in total borrowing by local authorities, according to our estimates. I think that there is some misapprehension. We do not expect that either the net or the gross total borrowing in the coming year will be very different from last year. In fact, there may well be some decrease.
The hon. Lady the Member for Finchley, if I may say so without sounding patronising, made a very helpful and responsible speech and showed great understanding of the reasons why we had been unable—and it is a matter of great regret for us that we are unable—to implement the aim of a further 10 per cent. increase in access to the Public Works Loan Board this year. She asked me to confirm that the policy to which I referred today and the alteration in the rules on one-year borrowings was an interim policy. She suggested that the effect of this change in the rules was tantamount to redefining short-term borrowing from one year to two years.
I take the hon. Lady's point. I do not think that it is quite accurate, because one-year borrowing still qualifies for quota, but not more than once. As was explained to the local authority representatives when this matter was first discussed with them, this is meant to be an interim solution, but we must face the fact that the problem of the inequity between the one-year borrowing and the something over one year borrowing—be it 13 months or two years—which qualifies for a double quota will remain. This is something which we are discussing with the local authorities and we are inviting suggestions from them. We shall have to try to think of a proper solution to this problem.
That also involves the point which was raised by my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant), in an extremely well-informed speech. He pointed out that there might be an attempt to evade the spirit of this new provision by means of a 13-month loan raised just before the end of the financial year. Fortunately, it is some time before we get to the end of the financial year, and no doubt that is one of the matters which we shall have to consider and discuss with the local authorities.
The hon. Lady invited me, as did other hon. Members, to comment on and enlighten the House more about what our policy might be next year and what our longer term policy is. I am sure that no one was so optimistic as to expect me to stick my neck out by saying now what we will be able to do next year. If I knew that, I would have said it in my opening speech. It is precisely because


it must depend on the extent of our recovery and our general economic position that I am unable to say now what we shall do next year. I reaffirm that it is certainly our policy to implement the target set in the White Paper as soon as we are able to do so.
As I fully expected and as happened last year, a number of my hon. Friends pressed me to go further than that. The hon. Member for Walthamstow, East, in his maiden speech, and my hon. Friends the Members for Rotherham (Mr. O'Malley), for Croydon, South (Mr. Winnick) and for Stoke-on-Trent, Central all want to see a move towards a restoration of the post-war position where local authorities obtained virtually the whole of their borrowing through the Public Works Loans Board. That, of course, has for long been the goal of many hon. Members on this side. Obviously, it involves a very important policy decision, and it would not be right for me to go further than say that we are very conscious of that feeling by hon. Members on this side and by many people outside the House. In the meantime, our first goal must be to implement the targets which were laid down in the White Paper as early as we can.
I am sorry if I gave my hon. Friend the Member for Croydon, South the impression that I was in any way complacent about the situation. I assure him that that is not so. If nearly two years in the Treasury have taught me anything, it is that there is no room for complacency.
The hon. Lady the Member for Finchley, followed by a number of hon. Members on both sides, paid a tribute to the work of borough treasurers, who have had great difficulties to contend with. I think that we all join in admiration for them in the way in which they have handled these problems.
The hon. Member for St. Ives (Mr. Nott), in his post-maiden speech, made an extremely well informed contribution and over-modestly described the part that he himself had played in the introduction of the yearling bonds, though that is not the term by which he likes them to be known. They have played an important part in local authority finance in the past year. Like him, I do not seek to criticise local authorities for the measures they have adopted and were fully entitled to

adopt, even though they have resulted in our having had to alter the rules, for reasons which I have explained and which are fully understood.
The hon. Member put forward three suggestions of a somewhat technical character on which I should like to comment briefly, but by no means finally. First of all, he raised the question of the million pound limit for these negotiable bonds. I think that I am right in saying that that was the limit originally proposed by the local authorities themselves. But, quite clearly, a problem will arise shortly, when those quotas have been taken up, of what are to be the future limits which will be allowed and what should be the basis for them. That is something which we shall want to consider further and discuss with representatives of the authorities.
The hon. Member then suggested an alteration of the exchange control regulations in a way which he considered would encourage non-resident investors who were lending to local authorities to lend on a rather longer term basis than at the moment. I am not sure that the facts as he stated them were quite complete. The matter is a little complicated. At the moment, a non-resident can invest or disinvest as follows. If he invests short-term, he buys with official exchange and gets official exchange on selling either at or before maturity, as the hon. Gentleman stated.
For a term of from one to five years, he buys with official exchange and gets security sterling on selling before maturity or official sterling on selling at maturity. Over five years, he buys with security sterling and gets security sterling on selling before maturity or official sterling on selling at maturity. So that it is true that there is a slight penalising of one to five year lending compared with either short-term or longer term lending.
To make the alterations which were suggested by the hon. Member would reduce the protection given to the reserves by the security sterling system against sudden large disinvestment by non-residents. Moreover, it is only fair to concede that at present the disincentive is not very great, because the discount on security sterling itself is low. However, I will undertake to look into the suggestion made by the hon. Member, and, if he wishes to elaborate further on the


matter by letter, I will be very glad to reply.
The third point which he raised was a suggestion for allowing five to 10-year bonds to be eligible security at the Bank of England. Again, that is something which we shall be prepared to look at with the Bank of England, but my first reaction is not to think that I can lend the hon. Gentleman any great encouragement.
The hon. Member also raised the rather wider question of an index bond for local authorities, tied in some way to the cost-of-living index. As he said himself, there are formidable objections to a proposal of that kind, because it raises very much wider implications for the whole savings policy.
Of the other specific questions that I was asked, my hon. Friend the Member for Rotherham, who again made an extremely well informed speech, asked me to give not merely the percentage figure but the total amount of short-term borrowings by local authorities. The latest figure that I have is £1,738 million.
The hon. Member for Stoke-on-Trent, Central, like some other hon. Members, was pressing the point of the disadvantage of local authorities in the market and suggesting that we should make the Treasury bill market available to local authorities. Of course, more local authorities are issuing bills and getting some benefit from the bill market, but, for reasons of monetary management, it is not possible for us to permit an uncontrolled expansion in the number of those bills.

Mr. Cant: My hon. and learned Friend has used the phrase "uncontrolled expansion". We have spent much time today discussing this phenomenon of uncontrolled expansion of local authority short-term borrowing. Is not this a much bigger factor than anything likely to take place through the issue of Treasury bills? Indeed, I think that the Treasury bill in the last 18 months to two years has been in decline and that local authority participation in this market could institute a revival.

Mr. MacDermot: I think that the figures I gave show that there has not been an uncontrolled expansion of short-term borrowing by local authorities. One

of the achievements of the changes since the White Paper was published has been a much greater control over short-term borrowing by local authorities.

Mr. Hordern: Does not the particular answer to the point raised by the hon. Member for Stoke-on-Trent, Central (Mr. Cant) lie in the Radcliffe Report, which stated that the issuing of public authority local Treasury bills or the equivalent thereof counts as part of the clearing banks' free reserves and, therefore, if monetary authorities should wish to squeeze the banking reserves, to that extent these local authority bills would lie outside the system, thus allowing the clearing banks to remain outside the policy?

Mr. MacDermot: That is another aspect of the problem. The hon. Member for Horsham, I think, in his winding-up speech, yielded to the temptation to be rather more political than the hon. Lady the Member for Finchley. He referred to what he called a "monstrous change" in the rules from 40 per cent. to 30 per cent.
There has not been a change in the rules. The position is that aims were put forward in the 1963 White Paper and that the achievement of these aims was dependent upon certain conditions being satisfied. For the reasons I have stated, it has not been possible this year to achieve the 40 per cent. target for the coming year. But I do not think it right or fair to call this a change, still less a monstrous change, in the rules.
The only change in the rules that has taken place is the one I referred to about short term borrowing and for the reasons I have given this is accepted, I believe, as being not only a necessary measure but a fair measure and fair as between different local authorities. The hon. Gentleman asked me in particular for the latest figure, referring to the 16 per cent. figure that I gave in December, of the percentage of short term borrowing by local authorities. That is still the latest available figure. The end of March figure is not yet available. The hon. Gentleman asked me another question at the conclusion of his speech and because of this timing I am not yet in a position to reply. I will write to him when I can do so.
These are the best answers that I can give to the specific points raised. The


general trend of the debate has been to show that, among hon. Members on both sides of the House who have brought a great deal of expert knowledge to bear upon the Bill, there is a general understanding of the reasons why we have not been able to go further than we have to help local authorities by increased access to the Board. I note the strong feelings on this subject. We are aware of them.
We are grateful generally for the understanding reaction that there has been both inside and outside the House to the unpalatable steps we have had to take this year, and I hope that we can look forward before too long to a general improvement in the economy which will enable us to make further progress on the lines of the White Paper policy.
I hope that the House will now think it right to give the Bill its Second Reading.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Walter Harrison.]

Committee upon Monday next.

Orders of the Day — LAND COMMISSION [MONEY]

Resolution reported,

That, for the purposes of any Act of the present Session to provide for the establishment of a Land Commission, to make provision as to the finances of the Commission and to confer on the Commission powers to acquire, manage and dispose of land, to impose a betterment levy in respect of land, and for other purposes, it is expedient to authorise—

(1) the issue out of the Consolidated Fund or raising by borrowing of such sums as may be required to be so issued or raised in consequence of any provision of the said Act of the present Session whereby, subject to a limit of £75 million on the aggregate amount outstanding by way of principal in respect of the advances, the Treasury may

make advances out of the Consolidated Fund to the Land Commission for the purposes of the Land Acquisition and Management Fund established under that Act;
(2) the payment out of moneys provided by Parliament of—

(a) any expenses incurred by the Land Commission in consequence of any provision of the said Act; and
(b) any expenses incurred by any government department (except the Postmaster-General) in the provision of premises, facilities or services for the Land Commission.

Resolution agreed to.

Orders of the Day — WAYS AND MEANS

[12th May]

Resolutions reported,

LAND COMMISSION

1. That a levy, to be called betterment levy, shall be imposed in respect of land; and that it is expedient—

(a) to make provision as to the rate at which betterment levy is to be charged and as to the value or other amount on which it is to be charged, and
(b) in other respects to make provision for the assessment and payment of betterment levy, including provision for the payment of interest on the principal amount of the levy.

2. That, for the purposes of any Act of the present Session to provide for the establishment of a Land Commission, to make provision as to the finances of the Commission and to confer on the Commission powers to acquire, manage and dispose of land, to impose a betterment levy in respect of land, and for other purposes, it is expedient to authorise the payment into the Exchequer of sums required to be so paid by virtue of that Act.

First Resolution read a Second time.

Question, That this House doth agree with the Committee in the said Resolution, put forthwith, pursuant to Standing Order No. 90 (Ways and Means Motions and Resolutions), and agreed to.

Second Resolution agreed to.

Orders of the Day — RENT ACT, 1965

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Walter Harrison.]

1.46 p.m.

Mr. Frank Allaun: Nearly one in four families in Britain will be affected by Labour's Rent Act, 1965. The Act is a serious attempt to undo the grave injustices caused by the Conservative Rent Act, 1957, which has probably caused more suffering than any other Measure since the means test of 1931.
The 1957 Act permitted landlords to raise their rents roughly by two-thirds, but in addition, for the first time since 1915, when the Rent Restriction Act was introduced, it removed control entirely from a dwelling which, for any reason, had changed hands—"creeping decontrol," as it became known.
The landlord could double, treble or quadruple rents and that, because of the terrible housing shortage, is what he often did. High rents have become a curse for many people and to two sets of people in particular—those on low incomes and those living in London. Both are paying more than one-third of their total income in rent in many cases, which is an appalling predicament. I know of a gardener employed by a London borough, who earns £12 a week. He pays £5 10s. a week for a single-bedroom flat for himself, his wife and his baby. That is an unconscionable proportion.
This housing shortage still exists. The 1965 Act aims at fixing rents which will ignore the pressure of demand—that demand which has caused such fantastic market rents to be secured. Several million families will eventually be involved. At the moment, only a small proportion of the new rents have been decided. They are, however, sufficient to indicate the new pattern likely to be followed. Same of the results are satisfactory. Others are so disquieting that there will have to be big changes if the tenants are not to become disillusioned and the Government discredited.
I am grateful for having been granted two Adjournment debates on this subject. The first was in February and in that I drew attention to the first rents fixed

by the newly-appointed rent officers in London. I intend to take a second look at this in a moment. Although some hon. Members from the Metropolis may not realise it, the majority of British people live outside the Metropolis. I am glad this afternoon to be in the position, following interviews I have had with rent officers in a number of towns, to say something about the new rents fixed in the rest of the country.
In the great industrial areas of the North and Midlands the ordinary family lives in a house in a long row of terraced houses, two up, two down, no bath, no hot water and no inside toilet. These are "Coronation Street" type houses, but for the most part they are not nearly as nice as the "Coronation Street" houses we see on our television screens. They were built 80 to 100 years ago. They lack damp courses and this has serious effects. They have been paid for over and over again in rents and some of them are so bad that the landlords should pay the tenants to live in them. Throughout Europe I doubt whether housing is as bad as it is for millions of our fellow citizens in Britain.
Mostly, these houses lie outside slum clearance zones, only becouse of the sheer weight of numbers of houses waiting for clearance and replacement. I will give the figures for a typical house of this kind. I have chosen it because it could be repeated one hundred thousandfold and because the new rent fixed for it is being approximated by other rents of a similar type.
This is an actual house in Gorton, Manchester. The rent before 1957 was 8s. a week plus rates, which is all that it is intrinsically worth. It was built 95 years ago for about £80. The controlled rent under the 1957 Act was raised to 12s. a week plus rates. Then the house became hit by creeping decontrol, thanks to a change of tenant, and until last week the tenant was paying £2 3s. plus 7s. rates. He took his case before the Manchester rent officer and, I am glad to say, the rent was reduced to 18s. 6d. plus rates. I could list similar houses in other parts of the city, the rents of which have been reduced to 18s. from 28s. 6d., to 20s. from 56s. 3d. and to 19s. from 28s. 8d.
In Sheffield, the rent officer is fixing rents for "two ups" and "two downs"


varying from £1 in the poorer situations to 25s. in the better ones, and about 30s. where there is a bath or bathroom in the house. For the 75-year-old property or older—this is the stuff with which we are dealing—the new Sheffield rents are being fixed at roughly twice the controlled rent and one and a half times the gross value, but I think that for the modern semidetached houses they are being fixed at nearly three times that amount. In Leeds, back-to-backs in good condition are averaging £1 to 25s. In Bradford, the rent of a typical back-to-back with two bedrooms, possibly bigger than usual, has been fixed at 19s. In Salford, rents of £1 7s. 6d. and £1 12s. 6d. have been determined for terrace houses without baths.
The fact that the landlords have, for the most part, not challenged these figures seems to indicate that they regard them as not unreasonable. These tenants are fairly satisfied customers and I profoundly hope there will be no reversal of these determinations by the rent assessment committees, should the rents be appealed against in the disturbing way that they were dealt with by the panels in certain earlier cases in London, about which I will say something shortly.
The next reservation I will mention—and everything I say from now on concerns London houses as well as provincial ones—is that while decontrolled rents has been dealt with by the rent officers and the panels, the Act gives the Minister of Housing and Local Government, should he pass a special Order in the House after affirmative assent, the right to empower the officers then to proceed with the majority of the remaining houses; those dwellings at present controlled. Indeed, certain private landlords have formed an organisation to lobby and bring pressure to bear precisely for this purpose. I dread the consequences if my right hon. Friend gave way.
I refer again to the Manchester house for which I gave figures. Nearly every other house in the street is paying the controlled rent—12s. a week plus rates. But if the rent officer has held that 18s. 6d. plus rates is the fair rent for that house, it will be argued that all the other houses should have their rents raised to the same figure because they are almost identical houses.
Similarly in London, where there have been fairly substantial reductions. For

example, many of the new rents are, I estimate, about three times the old controlled rents. That means that the majority of rents in London and elsewhere would be roughly tripled at some future date. That will happen over my dead body and over the dead bodies of many of my hon. Friends.
I profoundly hope that a Labour Minister of Housing would never seek this power. It would be utterly wrong if it turned out that the Labour Party, which I and many other Labour supporters thought would bring rents down, instead was responsible for pushing them up. Even if increases can be in stages now of only 15 per cent. per year—thanks to an Amendment which some of my hon. Friends and I pressed—it would still mean death by a thousand cuts.
My second main point is that in the first few cases brought before the rent assessment committees—or, for brevity's sake, "panels"—the panels partially reversed the determinations of the rent officers. These were disastrous decisions and only this morning I heard from my hon. Friend the Member for Glasgow, Provan (Mr. Hugh D. Brown) equally disturbing reports about the position in Scotland.

Mr. Hugh D. Brown: Is my hon. Friend aware that of the two cases referred to the rent assessment committee in Glasgow, in one case an increase of 13 per cent. over the rent officer's figure was accepted and in the other an increase of 26 per cent. was accepted? It seems that scarcity value is determining the level rather than the considerations that most of us had in mind. Unless the Government watch this carefully, confidence will be destroyed not only in the rent officers but in the intentions of the Government.

Mr. Allaun: I am grateful for that intervention, because it confirms what I am saying.
In the February debate I expressed satisfaction that rent officers throughout London were reducing rents fairly substantially. I admit that there may be exceptions even to the rent officers' findings but, on the whole, I was reasonably satisfied. So I was dismayed to find that of the first six decisions of the panels, five had overruled the rent officers


and gone against the tenant. In not one case had the decision gone in the other direction.
For example, where the rent of a flat had been £442 exclusive, the rent officer had reduced it to £338—only to have it raised to £375 by the panel. In another case, a rent of £230 was raised to £280 by the rent officer, and when it went before the panel it was further increased to £351. Similarly, a rent of £364 a year was reduced by the rent officer to £200, and put up again by the panel to £305—an increase of £2 a week on the rent officer's finding. It seemed that the panels were fixing a figure roughly half way between the original rent and that fixed by the rent officer. Those cases were among the first six dealt with by the panels in London.
I am a little, but only a little, relieved to be able to tell the House that this has not been exactly the picture presented by later sittings of the London panels—and I am trying to give a fair and balanced account. I feel strongly. I should like to thank the office of the London Rent Assessment Panel which has kindly supplied me with complete details of every one of the 23 cases decided up to Tuesday of this week. In eight of the later 17 cases, the panel has upheld the rent officer's determination; has reduced it in two cases, and raised it in six cases.
I should very much like to be able to adopt the practice in the United States Congress, where I am told that Congressmen can "read in" statements for publication in the report of their Chamber. I should like to be able to read into our OFFICIAL REPORT full details of these rent assessment committee findings, as they are of great public interest—

Dr. David Kerr: I do not wish to interrupt my hon. Friend unduly, but I am a little perplexed. His figures do not add up, and if he is to put this information in the OFFICIAL REPORT it should be accurate. My hon. Friend referred to 17 cases, and said that in eight the decision was upheld, in two it was reduced and in six it was increased. That makes a total of only 16.

Mr. Allaun: I apologise for the error. I should have said that the panel unheld the rent officer's decision in eight cases,

raised the figure in seven cases, and reduced it in two cases.
Obviously, I cannot "read in" these findings, so it must suffice me to give instances of rents finally decided, and registered for the next three years with panel approval. The rent of a small terrace house in Plaistow has now been finally fixed at £3 a week, the rent officer having determined £2 10s. I may say that all these figures are exclusive of rates. A rather similar house in Bow has been fixed at £2 12s. 6d. against the £2 10s. determined by the rent officer. Two rather poorer houses in Plaistow—£2 5s. each; in both cases confirming the rent officer's findings.
A ground floor flat in a newer house, occupied by two families, was fixed at £4 9s. for the single flat compared with the rent officer's £3 5s. A terrace house in West Croydon—£5 as against £4 12s. A self-contained basement flat in Croydon—£3 1s. 6d.; confirming the rent officer's findings. A self-contained ground-floor flat in Sudbury—£4 15s.
Here, it is interesting to note that the rent officer's figure was £5. I must give credit, where it can be paid, to the panel. Two self-contained purpose-built flats in a four-storey block in Brent—£5 each, as against the £4 16s. assessed by the rent officer. Most of these are increases to which I am absolutely opposed, but they are not quite so bad as the first six decisions.
I find it very hard to understand those first six decisions. In one case the rent was £9 a week, plus £2·7s. for rates—£11·7s. a week for what was by no means a luxury penthouse. How could it be held that such rents as were fixed in those six cases excluded the shortage factor which the Act expressly requires to be ignored? Could it be that the eminent lawyer and the chartered surveyor, who comprise two of the three members on every panel, are overborne by considerations of property market values? After all, it must be very hard for a chartered surveyor to avoid that kind of thing. He has always worked against that kind of background, and I can quite understand his difficulty.
I agree that it is early days yet, but of such findings were to set a pattern the dissatisfaction would be deep and widespread. The whole of Labour's rent legislation would be in jeopardy—and


that may still happen. The rent solution is still in the melting-pot. Indeed, the effect of those very early decisions is now being felt. At first, only a small proportion of rent officers' determinations were being appealed against, but the landlords saw how the land lay; a far higher proportion of them—about one in four—are now taking their cases to the panel. One property company has decided as a matter of policy to appeal against every decision. It evidently thinks, "We are likely to gain something and not likely to lose anything." The panels will be flooded with references, and it will take them many months to catch up.
The decisions in those first half dozen cases must have been mystifying to rent officers. I know that to be so. I know of one rent officer, with a lifetime of experience in these matters, who says, "Well, if the rent assessment committee is right then I've been registering rents about £2 a week lower than I should have done—and I don't think that I was out in my reckonings".
If such high rents were to continue to be fixed by the panels then, against their own experience and judgment, rent officers would feel compelled to move in the upward direction. That would be a calamity. What is more, rent officers personally inspect each dwelling inside and out, and measure it, before making a recommendation or registration. The committees do not. They depend on what they call a referencer—a word that I have never heard of previously—an employee who may go to the property, so the panels are less well-informed than the rent officer.
For instance, in a recent case in Wembley a member of the panel said, "Well, Wembley is a residential district." But the street in question was by no means of a "residential" character. I understand that some rent assessment committees now drive up in a car just before the hearing and look at the outside of the house or flat. That is better than not going at all, but it is not as good as the practice of the rent officer, who goes inside the house, where a very different picture may be revealed.
My contacts with rent officers all over the country convince me that they are doing their work most conscientiously. They are spending weeks surveying their

areas before getting down to inspection of individual houses, having approached their difficult task with diligence, wisdom, patience, sympathy and experience. What has struck me most forcibly when attending recent rent assessment committee hearings is that the chairmen have bent over backwards to help inarticulate tenants. I am grateful for that. Nevertheless, the dice are heavily loaded in favour of big property companies. Those firms, with hundreds or even thousands of properties, are employing most expensive lawyers and chartered surveyors to represent them before the tribunals.
To give tenants a fair chance, I hope that the Government will give further thought to allowing free legal aid to be available to tenants. This is desirable when they appear before rent officers and it is absolutely essential when they appear before the panels. This week the Attorney-General told me, when temporarily turning down the request, that the maximum of informality was desirable. I agree, but in fact, lawyers and chartered surveyors are at the moment representing the big property companies before the tribunals.
A question which puzzles nearly everybody concerned with the application of the Rent Act—it certainly puzzles me—is why so few tenants who are paying exorbitant rents take their cases to rent officers. Up to 16th April only 8,201 applications had been made in England and Wales, which is a very small proportion of those who feel deeply aggrieved. Many rent officers are of the view that there is still a lurking fear among tenants that the landlord will be able to evict them in reprisal. This, of course, is not the case.
This is one thing which the Rent Act has done, although there is one loophole which still needs closing more tightly. Nevertheless, tenants are mistaken on this matter. I know of some who have been told by the rent collector, not that they will be evicted, but, "Go ahead if you like, but I warn you there will be precious few repairs done in your house in future if you do."
Then there is widespread anxiety about going to anything which has any semblance of a court. Many working-class people would sooner run a mile; I do not altogether blame them. There may be another reason. If the rent is registered for a typical house—and I


think that this is happening—landlords may be privately approaching tenants living in similar houses and reducing their rent, although whether they are reducing it to the same extent is another matter. Some tenants have been holding back to see what will happen.
I am coming to the end of my speech, because I know that several hon. Members with valuable experience to quote in this connection wish to take part in the debate. In most areas, although the Minister has made an attempt to publicise the Act, its provisions have not been thoroughly made known. Even today the majority of tenants do not know what their new rights are. A big drive is called for. I recommend that the provisions should be publicised on television in order to tell people about how to get a fair rent. When the news gets round of some recent rent reductions—again if the panels do not overrule the rent officer's determination, which is my main point—numbers of tenants will soon be making applications to rent officers. This is exactly what I advise them to do.
The Government must decide whether they accept the view of the big property companies that rents must go up. If so, the Rent Act will not have done what millions of people believe it was intended to do. The Government should reject the pressure of big landlords who have a formidable lobby. My goodness, hon. Members should read the Estates Gazette, a most lavish publication in which every week we see the very big interests involved. If the Government reject that pressure and restore reasonable rents, they will be blessed by the people of the country.

2.15 p.m.

Mr. Marcus Lipton: My hon. Friend the Member for Salford, East (Mr. Allaun) has rendered a most valuable service to the House and country by arranging for the operation of the Rent Act to be once again ventilated on the Floor of the House. He is absolutely right when he says that the kind of people which the Act is intended to protect are the last to want to appear before tribunals or rent assessment committees.
I quote the case of a constituent who is threatened with an increase of rent and is even afraid to go to the rent officer because she knows that it might mean that eventually should would have to appear before the rent assessment committee.
In a letter which she wrote to the Minister of Housing and Local Government, of which she sent me a copy, she refers to the advice to people to go before the committee and says:
They will, but they have no one to help them. Most lay people are quite incapable of presenting and stating a good case; the opposition in the form of the brain capacity of the landlords, the agents, and no doubt their solicitors, is so overwhelming as to demoralise any ordinary person. It is so difficult to be objective when the threat of being priced out of one's home is hanging over one's head. The opposition are in no danger of being priced out of their homes.
That summarises the attitude of many people when they see how the Rent Act is working in practice.
When my constituent sent that letter to my right hon. Friend the Minister, he suggested in a letter to me:
I would be grateful, therefore, if you could see your way to advising Mrs. —; you might possibly wish to represent her before the committee.
I do not know whether it is the Government's intention that any constituent in difficulty and having to appear before a rent assessment committee should call upon his or her Member of Parliament to represent him or her. I do not mind doing so as far as I can, but I should like the Minister to tell the powers that be that if there is a three-line Whip on a very important debate in this House, I shall probably be absent from the House attending a rent assessment committee to defend the interests of constituents against extortionate landlords.
The proposal is, unfortunately, symptomatic of the attitude of the Ministry. It seems to think that the process will work out all right, and to say, "It is true that M.P.s concerned will have a little extra work in these matters, but leave it to them to fight the matter before local rent assessment committees".
That confirms one of the points made by my hon. Friend the Member for Salford, East. It is a pity that tenants appearing before rent assessment committees will be denied any form of legal


aid. It is wrong that they should be treated less considerately in this respect than criminals.
In mentioning the facts in one or two cases, I shall speak only of the London Borough of Lambeth, where I have been watching as closely as I can the operation of the Rent Act. The latest figures produced by the Ministry show that over the whole of London 1,841 cases have been determined and that in 310 of those cases the rents were increased by a decision of the rent officer.

Mr. Albert Evans: The rent officer?

Mr. Lipton: I am talking about the rent officer now. I have not got as far as the rent assessment committees.
In the London Borough of Lambeth 122 cases have been determined, in 29 of which the rents were increased by the local rent officer. In the whole of the London area rents were increased in 16 per cent. of cases, whereas in the London Borough of Lambeth rents were increased in 24 per cent. of cases. This is an alarming state of affairs. I have never been under the impression that rents in Lambeth were so low as all that. Perhaps the local landlords have been afraid of the local M.P. and have been deliberately under-charging their tenants during the whole time I have been the Member for Parliament for Brixton.
I come to two specific cases. The lady from whose letter I quoted lives in a block of more than 100 flats which is privately owned. The average freely negotiated rent as between landlord and tenant when the decontrol was brought in by the previous Government worked out at about £360 per annum. In the one case where the tenant in that block of flats went to the rent officer, the rent was increased to £400 a year.
As a result of the rent officer's decision, the tenant of one flat in this very large block of flats has to pay a higher rent than all the other tenants. Inevitably, as a result of this one decision the rents for the 100 other flats will be increased from £360 to £400 a year. What the tenants of those flats cannot understand is that, whereas when it was possible to negotiate an agreement between landlord and tenant the rent on the average was £360, the rent

officer has now increased one rent from £360 to £400.
I come to an even worse case, that of a small row of terraced houses anything up to 100 years old. I will quote one case there. The rent was £3 5s. 5d. including rates—admittedly, a very low figure. The landlord asked the tenant to agree to an increase. The tenant was willing that the rent should be increased from £3 5s. 5d. including rates to £5 5s. a week excluding rates. The rent officer looked at the house and fixed the fair rent as £8 10s. a week exclusive. The rates are 25s. a week in addition.
So the 77-year old tenant who has been living in the house for goodness knows how many years finds that by a decision of the rent officer a rent of £5 5s. which the landlord would have accepted has been increased to £8 10s. exclusive of rates. The rateable value of the house is about £118 a year. Hon. Members will notice the difference between the rateable value and the rent fixed by the rent officer.
I do not know to what extent instructions or advice notes have been issued to local officers by the Ministry. I have documentary evidence which leads me to believe that rent officers are taking into account as a general principle that the landlord must be allowed a fair return on his investment. That may sound all right on paper; but where the landlord, for one reason or another, has paid an inflated price based upon scarcity value for the property, it is quite wrong for the rent officer to say that the landlord should get a fair return on his inflated investment. Unfortunately, this is what is happening in many cases.
It was all very well for the Government to say, when the Rent Bill was going through the House, that scarcity value could not be taken into account. It was all very well for them to issue instructions to rent officers and rent assessment committees that scarcity value must not be taken into account. Where the rent officer believes that the landlord must be allowed a fair return on his investment, the ground is being entirely cut away from the principle that scarcity value shall not operate.

Mr. Graham Page: I am sure that the hon. Gentleman does not want


to mislead the House in any way. Rent assessment committees, on appeal, have made it quite clear to rent officers that in taking a capital value on which to calculate a percentage return the valuer must take into account scarcity value and reduce the capital value by reason of scarcity.

Mr. Lipton: I should like to see how that will operate.
As soon as one begins to talk about what the capital value is and say that the landlord must get a fair return on his capital value, one embarks upon a dangerous twilight area. It may be that rent assessment committees, in their wisdom or innocence, will try to separate scarcity value from capital value, but the damage has been done at a very much earlier stage. The damage was done in the case I have referred to by a false or misunderstood basis on which rent officers are working.
Nobody can tell me that in the street I have in mind in Brixton a small house is worth £8 10s. a week exclusive of rates. I can understand that in some of the more fashionable areas of London rents of that order would be regarded as an absolute bargain, but not in an area like Brixton. Unless the Government take some action in this matter, it will be the duty of Members representing constituencies in the London area, and Members from other parts of the country, for some time to come to wtach with great vigilance, first, the decisions taken by rent officers, and, secondly, the decisions taken by rent assessment committees on appeal.
One effect of the decisions that have been announced so far is that tenants are afraid to go to the rent officer. They lie low and say nothing, in the hope that, if they do not go to the rent officer themselves, the landlord will not create any trouble, and, in the case of small property owners, will not bother to go to the trouble of appealing or getting the rent officer in and appealing to the rent assessment committee. The whole object of the exercise was to persuade as many people as possible to take advantage of the machinery that is now available. The decisions which have been made so far are having a deterrent effect.
I hope my hon. Friend the Joint Parliamentary Secretary will tell us that the

Government are taking some note of the serious doubts and disquiet which have been expressed by so many hon. Members since it has been seen how the Rent Act is operating.

2.31 p.m.

Mr. Albert Evans: My hon. Friend the Member for Brixton (Mr. Lipton) has given some rather alarming information about occurrences in his constituency. If what he has told us proves to be at all general, it would seem that the main purpose of the Act will be thwarted and that, instead of the Act being an instrument to bring fair rents to people it will be regarded as the basis of widespread injustice. I hope that the Minister will consider very carefully the facts which have been put forward by my hon. Friend, for, I repeat, if they are at all general the position will be extremely serious.
I should like to add my congratulations to my hon. Friend the Member for Salford, East (Mr. Frank Allaun) on having raised this matter today. It is a subject of widespread importance that should be considered by the House now. My hon. Friend said that it might be considered that the present is too early to judge how the new machinery to arrive at fair rents is working. The Minister may tell us that the number of cases adjudicated to date is insufficient to enable anyone to arrive at any general conclusion about the way it is working. It is true that, compared with the number of cases which may yet come to light, the number already dealt with is fractionally small and it might be difficult to form a general judgment upon the cases of which we have any knowledge so far.
However, let me put this point to the Minister. If these early cases do set a pattern for the future, great harm and injustice may follow. If in the early stages the panels, who are new to their work, have yet to acquire the experience necessary to enable them to make informed judgments, if in these early days as a result of inexperience the panels arrive at wrong and unfair decisions, the whole future of the machinery for arriving at fair rents may be undermined and may take a wrong turn.
Therefore, I submit that it is not too early to consider this matter. Indeed, I


believe that it is right to seize the opportunity now to look at the whole situation in case there is this early tendency for panels to go astray as a result of inexperience. It is important that the decisions now being made by the panels and rent officers should be acceptable by the populace generally as fair.
It would be a mistake and against the purposes of the Government and of the Act if these early decisions were to implant in the public mind the idea that rent officers and panels are biassed towards the landlord instead of trying to arrive at just and fair decisions. I repeat, it is very important that at this early stage in the operation of this machinery we should look at the matter to make sure that as far as possible fairness shall prevail and that people accept the idea that the officers and the panels are tending to arrive at fair conclusions.
The Minister, I believe, should now look coolly at what has happened to date. He might well go into consultation with the chairman of the London Panel. He might save the whole situation by calling a conference of the rent officers in the London area and analysing their experience. This is the time for the Minister to take stock, to bring the rent officers into consultation, to make contacts between the panels and the rent officers so that between them they can understand one another and arrive at a basis for their future operations, based on a general understanding of the position and resulting in fair decisions.
It would be lamentable if there were to grow up now between the panels and the rent officers tension, division and suspicion. Already, the rent officers are in a very difficult position. Theirs is not an enviable task. The rent officer has got to find his way through a lot of conflicting factors. He has got to try to work out a just decision in each case. But in almost every case he is a man with local experience. He understands his locality. He knows the type of population in the locality. He knows the degree of scarcity. He really understands his own ground and one cannot say that for the rent panels.
If, as a result of a panel turning down the rent officer's decision and increasing the amount which he thinks is a just rent, the rent officer loses his confidence and feels that he is being overturned by

the panel in too many cases, he may well feel harassed in his judgment. One rent officer has told me that this is his state of mind. In many instances the panel increased the amount which he thought was a just rent, and he said to me, "What can I do?" He is a disappointed man, struggling with a problem which he finds a bit too big for him because he is not getting co-operation from those on the higher level who man the rent panels.
The Minister should, in any consultations which he might arrange, have full regard to the local experience of the rent officer. I am sure he will have a better assessment of what is fair locally than the rent panel can ever have. As my hon. Friend the Member for Salford, East said, the rent officer actually goes to the accommodation and inspects it, and, in the light of what he sees, in the light of his knowledge of surrounding properties and the general position in the area, he decides what he consider to be a fair rent.
But, with all respect to them, the members of the panel are not people who have had the advantage of knowing the local background of the cases coming before them. They can hardly do so. It is a London panel which covers a whole variety of different areas and different classes of areas, and it is not possible for the panel really to have a close and accurate view of the ground in each particular area.
There is a strong case immediately, before the thing runs away in a wrong direction, for the panels and rent officers, possibly with the help of the Minister, to exchange views and try to reach a basic understanding of how they will proceed in the future.

Mr. Graham Page: I wonder whether the hon. Gentleman would consider the attendance of the rent officer on appeal? The rent assessment committees have decided they will not have the rent officer before them. I think that it follows from his argument that the hon. Gentleman might disagree with that view of the committees.

Mr. Evans: That is rather a matter for the Minister to consider. I would support the suggestion. I think that the local knowledge of the rent officer, which is unrivalled in this field, should be available to the panel, but it is a matter for the Minister to consider, and consider


promptly, before this business turns in a wrong direction, possibly implementing the suggestion made by the hon. Gentleman.
We very much want this business to run fairly and in such a way that people generally will accept the decisions as being fair. We do not want it to deteriorate into a series of bickerings about particular cases. We want it to be generally accepted that justice is being done, and the Minister should look at the matter now to make sure that things will run along well and be acceptable to most people as fair.
My hon. Friend the Member for Salford, East mentioned the second half of this machinery for arriving at fair rents, the properties that are at present controlled. I hope that the Minister will soon be able to say when, at any rate in London, those properties will come under consideration and the landlords or tenants of them can apply to the rent officer for adjudication as to what he considers to be a fair rent. I hope that he will soon be able to tell us—not today, perhaps, but soon—how soon he can announce that controlled properties will be brought under review by the rent officers and panels.
That ought to be decided as soon as possible. [HON. MEMBERS: "As late as possible."] I hear my hon. Friends saying that they want it as late as possible. But it is an essential element in arriving at generally fair rents that these controlled rents should be looked at. Let us be quite honest with ourselves about it, if we can. Let us, if we can—I know it is difficult—be non-political about it.

Mr. William Molloy: If we are entirely honest, millions of people should now be living rent-free.

Mr. Evans: I do not think that that is very relevant to the argument which I am now trying to put.

Mr. Molloy: It is honest.

Mr. Evans: I accept it as honest, but no one can live rent-free. That is quite certain. We are trying to arrive at fair rents. I do not believe that anyone wants to live rent-free. Most people are quite prepared to pay a rent which they regard as fair.
I hope that the Minister will consider how soon he can bring the controlled

lettings under review because, at present, there are some instances of landlords receiving a very unjust deal. There is no question that there are such cases. As long as it continues, that factor will vitiate the whole scheme of the Minister to arrive at generally fair rents. If we are to have fair rents, we must be fair and we must be ready to consider the controlled rents as soon as practicable.
I agree that the uncontrolled rents are most urgent. The Minister knows that, and has taken them first, but there will come a time—I hope not too long delayed—when the Minister can say that, in fairness, the controlled rents should now be considered.

2.45 p.m.

Mrs. Lena Jeger: I do not know why my hon. Friend the Member for Islington, South-West (Mr. Albert Evans) is so anxious about the well being of the landlord.

Mr. Albert Evans: No, I am not.

Mrs. Jeger: This debate is remarkable for the total absence, except for two hon. Members opposite, of those whom we usually regard as the landlord's friends and who usually put his case with great force and eloquence in this place. I must, therefore, ask the forgiveness of the House if I concern myself more with the problem of the tenants.
We have put on our rent officers an immensely difficult job, and as the Minister made clear at the time, it was in many ways an act of faith. This was a new vocation. It reflected a completely new attitude to the whole problem of rents, and I am sure that all of us, especially those who worked in detail in the Standing Committee on the Rent Bill, have been watching its progress most anxiously. We are all most grateful to my hon. Friend the hon. Member for Salford, East (Mr. Frank Allaun) for bringing this progress report, for such it is, before the House. It is especially important because, unless the early decisions are right decisions and are seen to be right, we may have a completely wrong pattern of precedent set which will distort the whole future working of the Act.
I realise the difficulties of the rent officers. I know that many of them come


from very varied backgrounds, but I am sure that they are all trying, according to their lights, to arrive at fair and just conclusions. I am not sure, however, that we have been completely fair to them by the almost complete absence of instruction as to the way they should go about their work. I have spent quite a lot of time going into some of the decisions which have been made already, and I am worried because I find not only considerable differences in approach between officers in one area and those in another but even between rent officers within the same area where different conclusions have been reached in respect of similar properties. The result has been to create a certain amount of confusion and concern. It would be helpful to tenants, landlords and rent officers if the Minister could fairly soon have some form of conference with the people concerned just to see how things are going and to make sure that we are not having unfair disparities in the decisions being made.
I draw attention to one case which seemed to me to be an example of this sort of difficulty. There was an appeal heard on 28th April at Friends' House regarding a one-bedroomed flat over a shop in Upper Street, Islington, not a particularly luxurious neighbourhood. The tenant was paying a rent of £7 a week exclusive. The tenant, thinking that this was too much, was very happy when the Rent Act was passed and, quite rightly, went to the rent officer. The rent officer gave a decision that a fair rent would be £3 17s. 6d. Everyone was happy with that, except, of course, the landlord. The landlord appealed and, when the case was heard, a new rent was assessed. The rent officer was overruled, and it was decided that £5 15s. was a fair rent for a one-bedroomed flat over a shop in Upper Street, Islington.

Mr. Albert Evans: This case happens to be from my own constituency, and I have dealt with it in detail. It is not a one-bedroomed flat. I decided not to mention particular cases because they can be identified, as this one now will be. I can assure my hon. Friend that on some of her facts she is quite wrong. This is a three-bedroomed flat with a bathroom—not a one-bedroomed flat.

Mr. Flank Allaun: rose—

Mr. Speaker: Order. I am not very happy about interventions upon interventions.

Mr. Allaun: Perhaps, Mr. Speaker, you will allow me just to support my hon. Friend the Member for Holborn and St. Pancras, South (Mrs. Lena Jeger). I was at the rent assessment committee hearing. The facts that she has given are correct. It was a one-bedroomed flat. The main point is that when the young lady concerned was asked by the landlord's representative why she had been willing to pay £7 a week when she had seen 12 other flats first, she said "Because I was desperate for somewhere to live".

Mrs. Jeger: I thank my hon. Friend the Member for Salford, East. My hon. Friend the Member for Islington, South-West, will probably accept that there may be more than one case from his constituency before the rent assessment committee.
I should now like to refer to the reasons which the chairman of the rent assessment committee gave for his decision, because this gets at the heart of the whole problem. The chairman, Sir George Bull, was reported as saying that the amount of £5 15s. had been decided:
bearing in mind that this is a rising district, and also taking into account the scarcity element".
I really must ask the Joint Parliamentary Secretary whether he feels that such a statement should be publicly disowned or supported. If the statement by the chairman means that there is a scarcity element in the neighbourhood, this contradicts assurance after assurance that we were given at every stage of the Bill.

Mr. Reginald Freeson: Would not my hon. Friend agree that there are a number of us watching the progress with these early cases who believe that the present chairman should be removed because of the way in which he is conducting the business of the rent assessment committee?

Mrs. Jeger: I must leave the decision about the chairman to the Minister, but I feel it my duty to put this matter before the House because there have been repercussions throughout London as a result of that statement and the apparent increasing prevalence of this attitude.
When the chairman was challenged on this he quoted Section 27 of the Act, which says:
For the purpose of the determination it shall be assumed that the number of persons seeking to become tenants of similar dwelling-houses in the locality on the terms (other than those relating to rent) of the regulated tenancy is not substantially greater than the number of such dwelling-houses in the locality which are available for letting on such terms.
The chairman emphasised that, because the Section refers to there not being a substantial imbalance between supply and demand, where there was a substantial imbalance the scarcity element was rightly to be taken into account. I feel that if this attitude persists it will destroy the whole purpose of the Act. In respect of very many cases into which I have gone in great detail, visiting the tenants and seeing the amenities, I cannot escape the feeling that in the back of the minds of the assessors, if not deliberately in the front of their minds, is the routine, conventional market value.
I know that we are asking for a revolution of sorts when we suggest that there should be another attitude. I remember the Minister seeking to help us over this matter in Committee. He said that he thought that the best way in which to get an idea of values as distinct from scarcity values was to think of a district where there was no scarcity. He mentioned Sowerby and told us to imagine that any house or flat that we were considering for assessment of fair rent was in Sowerby. I am sure that if the flat to which I have referred had been in Sowerby, far from the landlord getting £5 15s. per week, which the rent assessment committee gave him, he would not even have got the £3 17s. 6d. which the rent officer gave him.
I stress the difficulties of those who have to make these decisions. We should have given them more help and guidance. I recall a case in my constituency where a one-roomed flatlet—it is in a block of flats, and it has services; I want to be honest about it—has been assessed at £315 per year exclusive as a fair rent. When I try to get at the thinking behind this assessment, I am told "Think where the flat is. Think what it is worth." Once we begin to think what the flat is worth to the tenant—in this case the tenant has accepted the ruling because it is so important for him to continue living

in the place—it seems to me that the whole analysis of fair rents which was behind our thinking in passing the legislation is being called into question. It is because of these disparities—I emphasise again that I do not think they are wholly the responsibility of those who are trying to administer this very complicated and difficult Act—that I hope that the Minister will indicate his Department's concern and his willingness to take some action.

2.56 p.m.

Mr. Ivor Richard: May I join a number of my hon. Friends in congratulating and thanking my hon. Friend the Member for Salford, East (Mr. Frank Allaun) for raising this matter in the House? He was fortunate in that the debate started at an early hour, and those of us who have been privileged to take part in it are fortunate, too.
This debate illustrates one fact which has become increasingly apparent particularly to London Members since the Rent Act machinery has been working, and looking around the Chamber I do see a large number of my hon. Friends from the Metropolis. Since the first few decisions of the rent assessment committees were published and made known, there has been an increasing doubt, suspicion and concern whether these committees, first of all, are excluding the scarcity element from their consideration and, perhaps even more important, whether they can exclude the scarcity element from their considerations.
When the Rent Act was first introduced I supported the whole thinking and the conception behind it wholeheartedly. It was my view at the time that it was a good idea to separate security of tenure, so that a tenant cannot be evicted, from the question of the rent which the tenant might have to pay. I felt that if we could have some machinery which at one and the same time gave the tenant the security of his own home but thereafter had a sufficient degree of flexibility to allow the landlord and tenant to arrive at a fair rent, subject to some kind of appeal machinery to ensure that it was fair, then this was a more flexible and novel approach to the whole question of the very difficult relationship between landlords and tenants.
Therefore, when the idea was mooted of having rent officers established for


each municipality who would know the area and could go round to see the property, who would operate on some specific guide lines given to them by the Minister—such as the comparable level of controlled rents in the area and the comparable level of local authority rents in the area—and who could then decide what was a fair rent of the property, excluding scarcity value, I thought that this was a very good principle. I recognised at the time that if there were to be a system of municipal rent officers we must have some system of appeal so that people could go from the rent officers to some appellate tribunal.
But having seen the way in which the rent assessment committees seem to be dealing with the problem, I am bound to tell the Government that my support for the new and flexible type of rent-fixing machinery is not quite as wholehearted as it was when the Bill was passing through the House. I thought that it was a very good idea to get away from the conception of having a mathematical formula which could be universally applied to all rents, because, frankly, I could think of no mathematical formula which could be so applied—apart from rateable value, which is a ludicrous formula for reasons which we all know—which was not so involved that the complications of applying it outweighed the results at the end of the day. The idea of having someone to look at the property and then define what was the fairness or otherwise of the rent seemed an excellent idea.
It was inevitable that from area to area different rent officers would come to different conclusions. It is inevitable in any system which tries to get away from mathematical formulae and which allows for flexibility that we shall have variations between the assessments of different rent officers. But from all the evidence which one is gathering in and around London it seems to me that the variations from borough to borough are over-large. I have had cases pointed out to me of almost identical houses, the only difference being that one is in one borough in London and another is in another borough in London, for which, there has been a considerable difference in the rents assessment. If one looks at the type of property it is very much the same; the sort of area the property is in is much the same; the comparable levels of municipal

rents are very much the same; but the rents assessed by the rent officers seem to differ a great deal. If we are to continue with this policy of flexibility, then at some stage the Ministry must issue sterner directions and more obvious guidelines to rent officers as to the basis on which rents should or should not be assessed.
It is wholly appropriate that we should be discussing the matter this afternoon. I have no doubt that in his reply the Parliamentary Secretary will point out that these are early days and that the Act has been in operation for only a short time. I believe that my hon. Friend the Member for Salford, East said that there had been only 23 cases before the rent assessment committees. It is true that these are early days, but every hon. Member from the back benches has emphasised that it is in the early days that patterns are being set. There is no doubt about this. There is a block of flats in my constituency about one of which the landlord is to go to the assessment committee. If he gets the right result, then perhaps 100 more tenancies will be affected. It therefore does not seem to me that these are too early days to discuss the matter when so much is involved.
I should like to make two practical suggestions if we are to keep this type of machinery although, as I have said, my doubts about it are beginning to grow. There are two things which the Ministry could do which would help. First of all, not only should rent officers be present at the hearing of the appeal but it should be possible to call upon them to justify their decision at that first instance. It may be that the rent officer has local knowledge which is not available to the assessment committee which, when it is put before the committee, might result in a different type of decision.
It therefore seems to me that the rent officer should, if possible, be there when the appeal is to be heard, and that he should be called upon—at the instance of either side or at the instance of the committee, it matters not—to justify his decision. It should then be open to argument by either party whether the original decision was right or wrong.
My second practical suggestion concerns a matter raised by my hon. Friend the Member for Salford, East. It is ludicrous—and I use the word advisedly—that tenants are not permitted legal


aid to come before a rent assessment committee. I have no doubt at all that the big property companies, in the centre of London for instance, will employ lawyers and that they will be the best possible lawyers they can get. They will employ surveyors and valuers who also will be the best surveyors and valuers they can get.
Speaking as a practical lawyer—and perhaps here I should declare an interest, for what I am doing in one way is advocating more work for my own profession, although it is very refreshing to hear my hon. Friend the Member for Salford, East saying that the Bar should have more work—I can say that anybody with experience of any type of judicial proceedings, whether formally in court or before some kind of tribunal, knows that the man who is represented has a head start.
Even if he is badly represented, he is still better off than the person who is not represented at all, particularly before a committee like a rent assessment committee which is somewhat technical and where he may find himself faced on the other side by people with much greater technical skill and knowledge and certainly much greater expertise and experience in putting a case. It is very important when dealing with this type of committee that tenants should be represented. I hope that at some stage the Government will rethink that part of the matter.
Finally, the criticisms which I have voiced and other criticisms which have been voiced from the back benches today about the operation of the Act are based on one thing and one thing alone. The Act was passed to benefit tenants, and indeed it has. But in my constituency, regrettably, I have yet to be wholly convinced that the way in which the Act is operating is benefiting tenants to the extent it should. I am not yet convinced that rent assessment committees are doing the job which they were set up to do in the way in which they were empowered to do it by the Act and the way in which the Minister himself told us that they would operate.
It is, therefore, in this attitude of concern about the way in which this aspect of the Act is operating that the debate is taking place. Although these are early

days—and although I do not want to cut away the ground from the Parliamentary Secretary's argument as I am sure that this is one of his main points—it is time that the Government had another look at the way in which the committees are operating, to see whether clearer guidelines and rather more direction are needed from the centre to ensure that the scheme is working properly.

3.8 p.m.

Mr. Reginald Freeson: It is not "although these are early days" that we are speaking, but "because these are early days". I have been disturbed—and I hope that he will not take offence at this—by the way the Minister to date, at Question Time, has reiterated the phrase "these are early days", or words to that effect, saying that, therefore, we cannot make judgments about how the Rent Act is operating. It is because these are early days that we are so anxious about some of the notable cases which are coming to the public eye and to our attention.
The object of the exercise must be to make sure that the Rent Act works fairly. There is no doubt that because of the manner in which the rent assessment committees are operating, the Act is already beginning to break down, that the fair rents procedure is already beginning to break down. I assure the Minister that I am not using exaggerated language.
This must not be taken as a rather inconveniently long Adjournment debate. That is fortuitous, but this is a very serious occasion when some of us—and we are not alone—have come to speak of the experiences resulting from these relatively few but very important decisions which have been made. In my own district it is known that there are people who are—I hope that the Minister will listen to this, because it is vital—withdrawing their cases from the rent officer as a result of these decisions.
There are landlords who, having first indicated their intention to accept the decisions of rent officers, see the results of some of the cases that have gone before the rent assessment committee, and then change their minds, refusing to accept the fair rent recommendation of the local rent officer and submitting their case to appeal. There are cases in which the rent assessment committee is recommending


higher rents than the landlords have been requiring. This is ridiculous. This is when the tenant has gone on appeal against either the recommendation of the local rent officer, or in cases where the landlord has not accepted the suggestion of the local rent officer.
I have said that people are withdrawing their cases. The Minister can and should check up on this quite quickly and easily. Tenants are withdrawing their cases and landlords are withdrawing their proposed acceptance of the fair rents recommended. What is more a situation is already arising whereby, as a result of the conduct of the Chairman of the London Rent Assessment Committee in accepting applications by landlords after the 28 days allowed them in which to make submissions, the phraseology relating to the 28 days is having to be deleted from the local forms.
As a result of this landlords are getting on to the telephone to the local rent officer and say, in so many words, "In view of what has been happening in the London Rent Assessment Committee, I have changed my mind. Although the 28 days have gone by, I intend to submit my appeal to the London Rent Assessment Committee, because I am fairly confident that it will give me a rent higher than you are recommending for the property." These are examples of some of the experiences of people brought about as a result of the conduct of this committee. Some of us are concerned with what seems to be a very high-handed attitude being adopted by the present chairman.
So far, all of the cases being handled by the London Rent Assessment Committee are being dealt with by the Chairman and two other members only. The chairman has decided that the other members of the London Rent Assessment Committee shall not come into operation. He has decided that when they do start to operate they will not necessarily be allocated to areas which they know best.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl): I have been very patient in not intervening in this debate, but my hon. Friend is going a hit too far. On the first point, it is not true that all cases are being taken by the chairman and vice-chairmen. The other committees have been sitting. In a second place, the rules about the panel

make it perfectly clear that the panel applies to the whole area. One does not have one's own little nest where one is well known. The whole point in having a panel of this size was to enable it to cover the whole area.

Mr. Freeson: The Parliamentary Secretary is getting very near to misleading the House, because it has been decided, whether by the Minister or the chairman of the rent assessment committee, that the committee will be broken up into panels covering areas in London. What he has indicated to the members of the London Rent Assessment Committee is that they may be allocated anywhere in London. Would it not have been far wiser for them to be allocated to areas which they know well? One of the troubles about what is going on in the London Rent Assessment Committee so far is that the decisions are being made about properties which are not sufficiently well known to members of the committee.
On the first point, my information comes from a member of the London Rent Assessment Committee. If there is some dispute about the facts, I suggest that the Minister gets in touch with either the chairman or the other members of the committee and finds out why they were told that the first few cases would be taken by the chairman and the two vice-chairmen only.

Mr. MacColl: That is quite a different story. What my hon. Friend says about the first few cases is perfectly correct. But he said that no cases are being taken by the rest of the panel. That is untrue.

Mr. Freeson: Perhaps my hon. Friend will say when they started to operate as a panel—that would be most interesting—and how many cases have been dealt with by the chairman and vice-chairmen compared with the number dealt with by other members of the committee. I should very much like to have information on when all the members of the committee will be authorised to start work. They have not all started work yet, and I had that information from a member of the committee.
What is also disturbing us is a point raised by my hon. Friend the Member for Salford, East (Mr. Frank Allaun) in a Question in the House early last week. The Attorney-General said, quite rightly


in principle, that he did not foresee that the rent officers or the London Rent Assessment Committee would conduct their proceedings in a formal manner or in such a way as to intimidate or inhibit tenants who were not represented by surveyors or other professional people. We happen to know that the Attorney-General was wrong.
Whereas the rent officers are acting in a very formal manner, sitting round a desk and talking with people, quite rightly, the committee is not conducting itself in this informal fashion. It is very formal—so formal that when the chairman enters all those in the room rise, as in a court of law. Am I correct on that point? It is no small matter if all the proceedings of this committee are to be conducted in this way when tenants are not represented by counsel or by professional people and are cross-examined as if in a court of law. That is the way in which the proceedings are being conducted.
Lastly, I come back to the sort of point which we discussed when the Rent Bill was going through the House. I will not go over all the ground or points which, even if we were not members of the Standing Committee, we put forward. We were concerned that no clear guidance was laid down in the Bill on the question of fair rents. We accepted the argument in the end that it was very difficult to base the rent on the traditional rateable value standards such as those to which my hon. Friend the Member for Barons Court (Mr. Richard) referred. I was as persuaded as he was that it was not the right way to do it. But we still expressed concern about the loose and vague way in which the relevant Section of the Act was worded.
There is no guidance in the Act, and far too little guidance has been given to the rent officers and, in particular, the London Rent Assessment Committee, about how they are to arrive at fair rents. It is ludicrous that the chairman and vice-chairmen of the London Rent Assessment Committee should be assessing rents at a higher level—and a considerably higher level—than the landlords want. It is surely not impossible for the Minister to give the kind of guidance which the other members have asked him to give about the principles on which

the London Rent Assessment Committee, in particular, and, if necessary, the rent officers should operate.
Broadly speaking, the guidance should be on the basis of what is known to be the capital, management and repair costs to the owners of the properties concerned—it is possible to get this kind of assessment—and a given percentage return on the capital and running costs. This is a principle in the 1949 Act which has been accepted for years, subject to revision. It has been raised progressively from a 6 per cent. return to a 12½ per cent. return on the capital cost of carrying out improvement works.
I cannot see why this principle cannot be applied in the operation of the Rent Act. It is possible to obtain information as to what the actual cost of property is in given areas—what the cost of running that property is and what the approximate cost of repairs is—and come to a conclusion as to what a reasonable rent might be on the capital and running costs of the landlord in operating the property.
That is a very rough and ready way of doing it, and it would mean a good deal of sophistication, but I cannot see why it should not be undertaken. Until it is undertaken, we shall remain in the realm of guesswork. What concerns us is the inconsistency of decisions which are being made by the London Rent Assessment Committee and, to some extent, by the rent officers.
I want to end on a somewhat more friendly note. Except for the criticism that we are making of the London Rent Assessment Committee and its conduct, most of us would accept that the Rent Act is operating fairly and has been a tremendous boon to many thousands of people in London and other big cities. That is all the more reason why we are concerned at the arbitrary and inconsistent conduct of the chairman, vice-chairmen and other members of the London Rent Assessment Committee.

3.22 p.m.

Mr. Ben Whitaker: I want to ask the Government, in their whole approach both to this question and to housing, to see the matter not in terms of property values but in terms of human values, and not be shackled by any straitjacket of past thinking in their approach.
A Labour Government should recognise that a decent home is an elementary human right, like health and justice. It is a basic necessity for every family and a foundation on which they might have the chance to build their own lives. So often, hon. Members opposite, either by their words or by their absence, as today, reveal that they view homes in terms of balance sheets. The professional type of person, who is so often appointed to rent tribunals and who is in the majority on almost all of them, inevitably tends to view things in that old fashioned way of thinking.
I ask the Government to remedy that by appointing, instead, experienced social workers and people who have experience of human values rather than of the less important matter of property values.
Finally, will the Government give a specific assurance that in every single case where the landlord is represented, the tenant has an automatic right to be represented as well?

3.23 p.m.

Mr. William Molloy: Mr. Deputy Speaker, I am aware that there are one or two other hon. Members on this side of the House who anticipate catching your eye. I must be brief, although it is a great temptation not to be, because there is so much that one could say.
The quintessence of the arguments which have been advanced by my hon. Friends is that we are now witnessing the worst possible situation at which any Act of Parliament can arrive. There have been a few good Acts of Parliament and quite a lot of bad ones. It was intended to pass a good Act of Parliament, but, now that it has got outside, it has gone sour and is becoming a bad Act. That is a very serious situation.
It has gone sour and is becoming bad because it would appear in the initial stages that the rent assessment committees have either not understood their work, have not been qualified to do their work, or probably come from a class which does not really appreciate what is involved. That may be a reasonable excuse for them, because they might not know what life is about for the average person who has to pay a rent. I do not mean that at all viciously, because it is a reasonable excuse. However, if that is

so, it is one reason why they should be removed immediately or sent on some sort of course.
I know a number of slum properties in London which would be admirable establishments in which to put these people on such a course for a couple of months. It would have a remarkable and salutary effect. Such a course would surely be followed by proper assessment of rents and rent officers themselves would get the "stick" from rent assessment committees if they arrived at decisions which put rents at too high a level.
I believe that it was my hon. Friend the Member for Islington, South-West (Mr. Albert Evans) who referred to the need to be practical, realistic and honest. Those are admirable sentiments. Indeed, if the landlords had been like that before the Act, it would not have been necessary. He argued that, when people have invested in property, they are entitled to some form of return. Are they? Are people who have deliberately got hold of bad property, primarily through the operation of the 1957 Act, and who have cashed in on scarcity justified in claiming that they are allowed to make profit out of human suffering and misery?

Mr. Albert Evans: I hope that my hon. Friend is not attributing to me the arguments he has referred to?

Mr. Molloy: Not all of them. What I am saying is that it seemed to me that, at one time, my hon. Friend was arguing that control should be looked at again more quickly. I hope that it will be looked at only in the time of my grandson—who I hope will serve in this place—but not before.
Surely one cannot accept as decent the behaviour of the minority who deliberately invest in bad property, knowing full well that they are doing so on the basis of cruel scarcity and are expecting to make profits out of it. [HON. MEMBERS: "Hear, hear"] I should have thought that those "hear, hears" would have been echoed by hon. Members opposite, that they would accept that this is a rotten thing to do. It is being done and not enough cognisance is being taken of it by the rent assessment committees.
I want to underline what was said by my hon. Friends the Members for Barons Court (Mr. Richard) and Holborn and St. Pancras, South (Mrs. Lena Jeger).


They put forward a good suggestion which I hope will be implemented as quickly as possible by the Government. It was that the rent officer should be present when an appeal comes up. But I would go a little further.
Ministers are sometimes rather keen to accept the advice of their advisers. I can imagine some of the advice that may be given in this case—"We cannot do this because it is impractical and rent officers have too much to do". I want to do something extra, nevertheless. In the event of the rent officer being unavailable or unable to be present at an appeal, we should place the onus of responsibility for supplying someone to protect the interests of the tenant on the local authorities. I am certain that progressive local authorities in London would be prepared to accept that proposition.
If there is one commodity that sends up the cost of living more than anything else it is rent. I warn my hon. Friend the Parliamentary Secretary that this debate should have impressed upon all concerned the strong feeling of the House about this Measure. I go further. Many of us have come here today because of the feeling that exists about this matter outside the House, particularly in some trade union branches. I warn my hon. Friend that if something practical is not done about this Measure, the prices and incomes policy of my right hon. Friend the First Secretary will be very seriously affected.
This is bound to happen when trade union officials are confronted by their members saying that, even after the assessment procedure, many of their rents have gone up by £2 or £3 and that the only way to abide by the decision of the local rent assessment committees is to ask the union to put in a claim for substantial wage increases. This is precisely the argument that is being used today in certain trade union branches.
We are now in the worst possible situation because not only is the Act not working in the way people anticipated that it would work—they were expecting to obtain justice under it—but, in addition, people are afraid to use the Measure because rather than get justice they think that, as has happened in certain

instances, they will get even deeper and further into the quicksands of injustice. The quicker something is done to remedy this situation the better, not only for Parliament and the Act but for people generally, because unless something constructive is done, and quickly, great frustration will be caused throughout the nation and this could have serious repercussions.

3.32 p.m.

Mr. David Winnick: I cannot help noticing the contrast between the action of hon. Gentlemen opposite last night in keeping the House sitting till a very late hour on behalf of their landowning friends and their absence today. Apart from one brief intervention, not one hon. Gentleman opposite has spoken in this debate. If the Rent Act machinery had been working as well as it should be, we might have had hon. Gentlemen opposite complaining about the rents being fixed.
The fact that Labour hon. Members are raising this issue—and my hon. Friend the Member for Salford, East (Mr. Frank Allaun) has done a great service in initiating this debate—shows the concern that is felt over some of the assessments that have been made by rent officers and rent assessment committees.
I hope to make a balanced speech and, to do this, I must consider why the Act was passed. I agree with my hon. Friend the Member for Willesden, East (Mr. Freeson) that the 1965 Act was a great asset to the nation. Whatever may be our feelings about some of the findings of the rent assessment committees, we cannot get away from the fact that the restoring of security of tenure was a great achievement. It did away with the terrible evils for which hon. Gentlemen opposite were responsible in 1957. I say without apology that the 1957 Act was one of the most shameful and wicked pieces of legislation ever passed by Parliament. Thus, to a large extent, we have got away from the evils of insecurity.
I support much of what has been said about the findings of the rent assessment committees. Some of their verdicts have been completely cockeyed. Some of the rents fixed as a result of the 1957 Act are becoming accepted—and this is my main reason for intervening—not by rent officers, but by many rent assessment


committees. There seems to be a feeling that tenants should pay what is known as a market rent, but it is my view that these market rents are completely unjustified and that there is a strong case for far more drastic reductions in rents than have taken place in recent months.
Though I recognise, as do other hon. Members, that rent officers are on the whole doing a very fine job, some of the members of the rent assessment committees—and I do not particularly make any rude remarks about them—are out of contact with the lives of ordinary people. In the main, they tend to be professional middle-class people, who are apt to look at rents rather differently from ordinary working-class people, who try to get a fair assessment from the rent assessment committees.
When the Rent Act machinery was being discussed, I was one of those in the Labour Party who suggested that we should go back to fixing rents according to the old-type rateable value. I made that point at the Labour Party conference in 1964, and trying to catch the eye of the chairman of the Labour Party conference is nearly as difficult as trying to catch Mr. Speaker's eye. Ministers, and the Government generally, argued that that was not possible; that there was need for flexible machinery. They may well have been right, but when he winds up this afternoon my hon. Friend should recognise that some of the findings, particularly those of rent assessment committees, are unfair, unjustified and way out of tune with the feelings of the Labour Party which demanded the repeal of the 1957 Act.
The Rent Act machinery is on probation. This debate has come about because many of us are very dissatisfied with some of the decisions. If the Rent Act machinery cannot be made to work as it should, and as, I am sure, the Government would like to see it work—I suggest that we should restore the pre-1957 position, and fix rents according to rateable value. I know that there are certain difficulties in doing that, but if it is found impossible for this type of flexible machinery to work in practice, it is the only alternative.

3.37 p.m.

Mr. Graham Page: I cannot, in an Adjournment debate, follow the

hon. Member for Croydon, South (Mr. Winnick) into the realms of altering the law, so I start by declaring an interest similar to that declared by another solicitor in the House. I, too, am of that profession, and I suppose that I have an interest when I plead, with him, that there should be legal aid in cases before the rent assessment committees. These cases should be conducted in the way that is best known for extracting and marshalling facts, and that is the way of normal court procedure. If a person gets involved in that procedure, he needs the assistance of those experienced in it. He therefore needs legal aid.
All of us who have been interested in the workings of the Rent Act and in the procedure adopted by the rent officers and the assessment committees have had varying reports of the conduct and decisions of rent officers. Some reports have been very critical; I think that the majority have praised their work. But, as the hon. Lady the Member for Holborn and St. Pancras, South (Mrs. Lena Jeger) has said there is a great variation between the decisions of rent officers in various parts of the country. Generally speaking, parties coming before them have been well satisfied with the thorough and conscientious way in which their cases have been treated. Of course, we have all heard the complaint, "The rent officer did not listen to what I was saying", but we get that sort of complaint everywhere, before any judge or arbitrator, and I do not attach very great weight to it.
I think that the unevenness of the decisions of the present rent officers has justified the case put by the Opposition in the debates on the Rent Bill in 1965 that rent officers ought to have been qualified valuers. That that would have been better has, I think, been proved by the results. Those debates forced an appreciation of the need to obtain men of experience and high calibre for this work, and I think that on the whole the Minister and the town clerks have discovered such men.
Nevertheless, that their valuations are frequently incorrect was shown by at least the first half dozen or so of decisions made by the London Rent Assessment Committee. The figures have not all been quoted. In every one of the first seven cases the committee increased


the figure determined by the rent officer—except in one, when the committee said that it would have made such a small increase—namely, "five bob" a week—that it would leave the rent as the rent officer had decided it.

Mr. Frank Allaun: I have agreed with much of what the hon. Member has said up to now, but surely he must recognise that the whole tenor of this debate has not been that the recommendations of the rent officers were wrong, but precisely the opposite, that in those seven cases it was the decision of the rent assessment committees which was wrong.

Mr. Page: I quite appreciate that the hon. Member is setting himself up as a court of appeal from the rent assessment committees. This has been the whole tenor of the debate. I shall try to justify the decisions of those committees.
I was pointing out that in all these earlier cases the rent assessment committee had decided to increase the figure determined by the rent officer. As cases have proceeded to come before the committee, the rent officer and the committee have come more in line. This surely was the idea behind the setting up of the committees, that they should set precedents—hon. Members opposite say they are wrong precedents—by which rent officers could guide themselves.
Of the other complaints I have heard about rent officers, one quite substantial one has been about the procedure adopted when an owner applies for a certificate of fair rent. As hon. Members will know, the position of the parties to a tenancy agreement is that the landlord cannot have second thoughts about the rent fixed by the agreement, but the tenant can. The tenant can go to the rent officer and ask for the agreed rent to be reduced. It is, therefore, important to the landlord—and, I think, to the tenant so that one can get agreement and some reasonable relationship between landlord and tenant—to have the prospective rent settled by the rent officer.
But in some cases I find that the rent officer is giving applications by sitting tenants priority over applications for certificates of fair rent. He is pushing applications for certificates for fair rent down his list and dealing first with applications from sitting tenants. I should

have thought he should deal with applications strictly in the order in which he receives them.
Coming to the rent assessment committees themselves, it was most regrettable that a personal attack was made on the president, and to some extent on the vice-president, of the Greater London panel. I think that the hon. Lady the Member for Holborn and St. Pancras, South set herself up, rather arrogantly, as a judge in a case at which she had not been present to hear the facts and had not heard the evidence. She was applying her own rather biased view of fairness and scarcity. I do not think it justifiable, on that basis, to criticise the panel, or particularly the president, by a personal attack on him when he and his panel are doing a very difficult job. They are doing a job which has never been done before. They have no precedent or tradition to work on, and, obviously, in the first 23 cases they had to work as best they could.

Mrs. Lena Jeger: It would be a matter of great regret to me if my attack were construed as having been a personal one. My attack was purely on what seemed to me to be the dangerous principle which had been enunciated by the chairman, which seemed to me to be in conflict with the Minister. I raised this because I was seeking guidance. If there is any implication of a personal attack, I should be the first to regret it.

Mr. Page: I am very glad that by my suggestion that there was a personal attack I have given the hon. Lady the opportunity of refuting it. I think that some of her hon. Friends were carried away by what she said and demanded that this president ought not to be there and that he should be removed. On the whole, I think that the panel is doing its job well. I should very much regret any Ministerial directions to a panel of this type. Even though some of its decisions are a little puzzling, I would hope that we shall leave them as judicial decisions and not interfere by any Ministerial directions.
Having said that some of the panel's decisions may seem a little puzzling, perhaps I may return to the point on which I interrupted the hon. Member for Brixton (Mr. Lipton) when he was talking about the capital value and the return


on capital value. In the early cases decided by the Greater London Rent Assessment Committee it comes out fairly clearly that the panel has tried to ascertain a capital—value the price at which the property would sell—that it has then discounted the scarcity value on that capital figure, and has then taken a return of 10 per cent. on that as being a fair rent.
This does not tally with what is recognised in another part of the Act as being a fair return on expenditure—the 12½ per cent. on the cost of improvements. If the committee is taking any percentage in that way, I should have thought that it should be 12½ per cent. and not 10 per cent. However, I am not sure that I agree that the Act allows that basis of valuation—on capital value. I recollect the Minister saying, during the course of the debates on the Rent Bill, that he was not having any truck with that. I had an Amendment down on this basis. The Minister said that he would not consider capital value as a basis of fair rent. I mention this because the hon. Member for Brixton raised the question of capital value.
I do not think that the rent assessment committees are sitting frequently enough. The Greater London Committee certainly is not. It is dealing with two or three cases a day of sitting. So far, the committee has got through only 23 cases. According to an Answer given on 25th April, 2,606 cases had been decided by 16th April; in 1,470 the rents were reduced: in 342 they were unchanged; in 397 they were increased; and in another 397 the cases were referred to the rent assessment committee.
The Greater London Committee has dealt with 23 cases. Thus it has 374 still to deal with. There are 5,982 outstanding applications. If, on a percentage basis, as many references will be produced from those 5,982 outstanding cases, the committee has to face another 900 cases. With nearly 400 already referred and another 900 to come, I am not sure how the committee will get through all its work if it deals with only 23 cases in two months. There will be very considerable and serious delays.
Having dealt with the points of procedure, I come to the two major points which I want to mention on
the most recent working of the Rent Act 1965".

to use the words of the notice of this Adjournment debate given by the hon. Member for Salford, East (Mr. Frank Allaun).
The House will recollect that the two chief purposes of that Rent Act were the basic protection and the regulation of rents. We have dealt mainly today with the question of regulation of rents, but I wish to touch on the question of basic protection. By that, I mean the protection to occupying ex-tenants, and that the landlord should not be able to take possession from them without obtaining a possession order.
During the debates on the Bill the Opposition pressed for expedited procedure on possession summonses. We put down several Amendments in various forms so that we could debate this subject. At first, the complaints about delay in the hearing of possession summonses were rather brushed aside, but later we were given promises that something would be done about it, that if a landlord was obliged to take proceedings against an ex-tenant who was obviously remaining in the premises without any justification, some rapid procedure would be devised to bring the case before the court.
Nothing has been done. It is true that there is, and there always has been, the right of a litigant to apply for an expedited hearing, or to be heard by the registrar of the county court instead of the judge, or to be heard in another court on that same judge's circuit. There has always been this form of application, but this is, and again it always has been, an exceptional procedure which the courts are reluctant to grant without proof of a strong case and without additional applications.
There is still serious delay in a possession summons coming on in court for hearing, and these cases affect mainly those where there has been accumulation of arrears of rent or where the letting of furnished property for a fixed term has expired. This is unnecessary protection to the unscrupulous tenants, and there are many of them, who deliberately take advantage of this delay in the proceedings. It causes considerable hardship to the private landlord, and by that I mean the individual; I am not talking about the property companies.
The property companies can employ their solicitors who will press and make the proper applications for expedited hearing. I am talking about the plaintiff who, acting in person, suffers from the two or three months' delay in the hearing of a possession case while the arrears of rent are accumulating and there is very little chance of recovering those arrears. I hope that the Parliamentary Secretary can tell us that this is recognised, that the promises given to us in the course of the debates on the Bill will come true and that we shall get some expedition of the hearing of these summonses.
Now for my second main point. The rents of controlled properties are still frozen. They are still tied to a gross rateable value of the 1930s. I ask the hon. Member for Salford, East: has it not been proved by the application of his own Government's fair rent Clause that controlled rents are no longer fair rents? He will recollect that under Section 11 of the 1965 Act the Minister has power by Regulation to convert controlled property into regulated property.
The Minister gave us assurances that he would carry out that conversion as soon as possible. That it should be done now is shown by the facts which are emerging from this procedure before the rent officers and rent assessment committees and which the hon. Member for Salford, East has put before the House so ably. The hon. Gentleman gave us the figures for Manchester, where the regulated rents are at least 50 per cent. above the comparable controlled rents. He has told us that in London the regulated rents are three times what they would have been as controlled rents.
The Act defines a fair rent. Rent officers can deal quite efficiently now, I think, with scarcity value. We debated all this at great length in the course of our proceedings on the Bill, and, had it been fair, as so many hon. Members opposite are now suggesting, that we should have controlled all rents and made them all controlled at that time, there would have been no point in the Rent Act, 1965. But a procedure of regulated rents was devised for the very purpose of achieving fairness between landlord and tenant.
I do not know whether the hon. Member for Salford, East and his hon. Friends set themselves up as judges of what is fair in rent. I do not think that he puts so much importance on himself. I understand his case to be that, if tenants are paying anything more than a controlled rent, then the rent is not fair. This is nonsense. Here is the definition of fair rent in the Act which the rent officers and rent assessment committees are now trying to operate. Controlled tenants, it has been shown by this operation, are not paying fair rents. They are paying less than fair rents. Fair is meant to be fair to both tenant and landlord.
The Minister should bring controlled property into regulation at the earliest possible moment. Even if it is brought into regulation at the present moment, it will take a very long time in London, for example, to come up to three times the controlled rent because it can rise by only 15 per cent. a year. I cannot mentally calculate 15 per cent. on 15 per cent. over a period, but I imagine that to bring it up to three times what it is now will take about ten years.

Mr. Richard: Will not the hon. Gentleman agree, nevertheless, that the Government expressed their priorities in the Act in relation to the rent assessment committees, saying that it was necessary for decontrolled property to be dealt with first and, once that had been sorted out, so to speak, and proper conclusions arrived at, controlled property could then be dealt with? The hon. Gentleman has just given us, as he sees them, the facts regarding the work of the officers and rent assessment committees, saying that they are overworked. If there is a burden on them now, would it not put an over-large burden to bring in the whole mass of controlled property? Secondly, taking the other half of his argument, that applications should be dealt with in strict order, would there not be a lot of landlords of controlled property jumping the queue over the others?

Mr. Page: That is only a measure of the unfairness of the present situation. If it has been so clearly proved that there is great unfairness in the rent of controlled property, unfairness to the landlord, the machinery should be improved and enlarged so as to deal with it. That is no justification for continuing what has


proved to be such an unfair situation for the landlord of controlled properties.
We have complete proof now that controlled rents are not fair. They are one-third of the fair rents in London and one-half of the fair rents in most other parts of the country. To answer an intervention by the hon. Member for Glasgow, Provan (Mr. Hugh D. Brown), the Scottish Development Department in February last stated that the average decontrolled rent in Scotland was 12s. a week and the average controlled rent was 6s. So there again the fair rent would be twice as much as the controlled rent.
This has been a quite extraordinary debate. All hon. Members opposite have criticised their own Government's Act, which they went into the Lobby to support in the last Parliament. I hope that the Parliamentary Secretary will not be rushed into giving directions to rent assessment committees or rent officers as a result of this debate. I hope that the result will be that the Minister himself makes a regulation extending process of ascertaining regulated rents to controlled properties.

It being Four o'clock, the Motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. R. W. Brown.]

4.0 p.m.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl): One of a series of, I thought, extremely unfair interjections during the debate which my hon. Friend the Member for Willesden, East (Mr. Freeson) made was to say that I must not regard this as an inconveniently prolonged Adjournment debate. I can assure the House that nothing has pleased me more than the fact that we have had this debate and that we have had the opportunity to look at some of the problems that arise out of the Act. I assure the House that I regard the Act as a great success and a great triumph, and I am fully prepared, on behalf of my right hon. Friend, to accept responsibility for it, and glad to do it.
Perhaps I might just dispose of two other points made by my hon. Friend the Member for Willesden, East, which

I rather regretted. One was the attack on the president of the panel for having started this absolutely unique operation—it has never taken place before—of trying to get some standards of rent over this appalling cesspool of horror which the Milner Holland Committee exposed. The president started by saying, in consultation with his colleagues—they are not all lawyers and valuers: they include Professor Donnison, a distinguished sociologist—"Let us begin by having a preliminary run as a team to enable the new panels which come into the picture to see roughly how it should work and how we should conduct our proceedings."
My hon. Friend the Member for Holborn and St. Pancras, South (Mrs. Lena Jeger) made an attack on a particular decision which was taken, and quoted the chairman—he was not, in fact, a vice-president but was a chairman. It was a little unfortunate that my hon. Friend the Member for Willesden, East should then have challenged me to give the date when they started sitting. My hon. Friend the Member for Holborn and St. Pancras, South had given the date, if he had only troubled to listen.
Another point that I should like to dispose of quickly is the suggestion that the president of the panel had indulged in a rather sinister conspiracy to allow landlords to appeal out of time from decisions of rent officers. That is a point which was discussed exhaustively in the House when the Bill was going through. I myself moved an Amendment—at any rate, I supported an Amendment after discussion in Committee—extending the power of discretion in the president to allow appeals out of time precisely for this reason. At the beginning one could not be sure of any uniformity of rent and, therefore, one had to have facilities for looking at the mistakes that had been made earlier on, in particular in the early stages of the proceedings.
I want to look at some of the points from which I think one ought to start in making an assessment of the operations and effect of the Act. I will start with what my hon. Friend the Member for Salford, East (Mr. Frank Allaun) said in the course of his speech, pleading with tenants to have no hesitation in going to the rent officers and rent assessment


committees, because they should not be haunted by the lurking fear of eviction. My hon. Friend and I agree that one of the great things that we have seen since the Act came into force has been the removal from whole sections of the community of that lurking and hideous fear which had existed since 1957.
I have made some inquiries. We have had a prosecution for unlawful eviction in Yorkshire, which shows that justice and law are operating north of the Trent as well as south of it. There has also been a prosecution for harassment in Lambeth, which will be a source of satisfaction to my hon. Friend the Member for Brixton (Mr. Lipton). I am not saying that the number of prosecutions or the nature of the penalties inflicted is a measure of the success. It is not. It is a measure of giving people a feeling of security. In spite of what has been said by some of my hon. Friends, I think there is evidence that the nature of the relations between landlord and tenant is already very greatly improving. This is the object of the Act.
Perhaps I might give an illustration for what it is worth. My colleague the Joint Parliamentary Secretary, the hon. Member for Bermondsey (Mr. Mellish) went to the constituency of my hon. Friend the Member for Brixton earlier this week for a teach-in on housing. He was accompanied by the right hon. Gentleman the Member for Leeds, North-East (Sir K. Joseph). My hon. Friend told me that is was a very full meeting—not a political occasion—run by the local churches, and that he was peppered with questions on housing. There was not a single question about the landlord and tenant problem, not a single question about unfair eviction, not a single query about a rent. I agree that one cannot prove a negative and that one cannot prove that, because this happened at this meeting, that is the position everywhere. But when I talked in Paddington before the election I had no questions about anything else. My right hon. Friend can therefore feel a certain amount of satisfaction that we are beginning to break out of the battle of partisan hostility in the very difficult problem of landlord and tenant which has bedevilled—

Mr. Lipton: The reason why no questions were asked at the teach-in about

the operation of the Rent Act was that it was held in part of the constituency where the rent officers have not yet begun to operate. The cases which I quoted earlier were from another part of the division, some distance from the teach-in.

Mr. MacColl: My hon. Friend is wrong. Rent Officers are operating throughout the Borough of Lambeth. He cannot get away with saying that, and I am surprised that he should want to do so. I shall deal later with the point which he raised.
Rent officers may make decisons which are wrong, and part of the whole machinery of the Act, as we have repeated again and again, is that it is the job of the rent assessment committees to correct mistakes which might, understandably be made in the early decisions. There have not yet been any appeals heard in the Borough of Lambeth. No doubt when there are, individual mistakes of that sort can be rectified.
We are making progress. Part II, which is the basis of the machinery of the rent assessment committees, is in operation in all but two of the assessment areas. The machinery is beginning to work, in spite of taunts made only a few months ago that we should never be able to do it and that the whole thing would break down.
May I come to some of the points in the debate? My hon. Friend the Member for Salford, East, with that irresistible charm which he always has on these occasions, is a man made for the game of cops and robbers. Previously the good tenants were the cops and the bad landlords the robbers—and that is something which we have all used in argument in our day. Now he goes on to say that the rent officers are the cops and the rent assessment committees are the robbers. He is determined to see everything in black and white in this way. What my right hon. Friend said in the debate previously—and I repeat it now—is that it is too early to come to a conclusion one way or another about it.
Just as my hon. Friend was too optimistic in February, when he thought that all the rent officers were the cops and that everything was wonderful and my right hon. Friend warned that we should be careful and that those were early days and that we were bound to get square pegs in round holes and bad decisions and that we had to be cautious. So I


now say to my hon. Friend that on these first few decisions of the rent assessment committee he cannot make any kind of final appraisal of the position. Now that he adds a further stage in the operation and goes back half way again to February, saying that he regards the later decisions as rather better, I still say that it is too early to get a picture of what is happening.
I assure him, as he generously said, that these people have the unenviable task of taking part in this unique business, and I think that they will operate better if they do not have my right hon. Friend breathing down their necks. I am bound to say that they will operate better if they do not have my hon. Friend breathing down their necks, because if my hon. Friend breathes down their necks, the hon. Member for Crosby (Mr. Graham Page) has the same right to breathe down their necks, and the wretched people trying to Jo a decent and fair job are pushed in different ways.

Mr. Frank Allaun: There is a good deal of truth in what my hon. Friend says, but when he speaks of fairness, what is fair to the tenant is unfair to the landlord. If we on this side of the House regard low rents as fair, hon. Members opposite regard high rents as fair. We have to take a decision. We cannot be absolutely impartial, because there is a conflict of interest between the landlord and tenant.

Mr. MacColl: Thank goodness, my hon. Friend is not paid to be fair. He is paid to be a great lover of humanity and an expounder of causes, but the people on the committees are paid to be fair and it is their job to look at both sides of the case and to come to a decision. That is the difference. What we have done in this Act is to take the gamble of taking rent fixing out of the hurly burly of party warfare and having it done calmly and dispassionately in a partnership between the rent officers and the rent assessment committees.
It was suggested by some hon. Members that the members of the London committee were all a lot of counter revolutionary Fascists. I should like to give idea of the background of the 38 lay members. Six of them are local government councillors or aldermen,

mostly with experience of housing problems, in other words, people used to the working of the democratic machine and to housing problems. Eight are housing managers, active or retired, with first-hand intimate professional connections with these problems, but not one of profit. Four are academics whose interests and researches are in the social sciences. Thirteen are social and welfare workers, many of them voluntary and including four members of the coloured community. Five are trade unionists, active or retired, and of the two regarded as miscellaneous one is an ex-borough treasurer and one an ex-employee of a trade union. I think that it can be said that my right hon. Friend has gone out of his way to get lay members of the committee who will not be pushed about by the professional experts, but who at the same time have intimate and practical knowledge of the problems.
My hon. Friend the Member for Salford, East considered some specific decisions of the rent assessment committees. I do not think that it is right that I should take it upon myself to discuss whether a particular decision is right or wrong. It is not my job and it is not the job of my right hon. Friend. My hon. Friend quoted a particular case and said that a rent of £9 was being charged. He asked if we could really justify such a rent. Against the hon. Member for Crosby we said that one had to bring high rateable value limits into the Act. He said, "do not bring them in", but we thought that we had to have them in. As a result of that, some of the rents which are fixed are going to be the rents of extremely good, expensive property. In that particular case the rent is only 1·36 of the gross value. That does not indicate that it is outrageously out of phasing with the level of rents.
This is behind some of the criticisms that have been made. It is important to remember that the problems arising in Kensington and Chelsea are very different from the problems arising in some of the poorer areas of London. One is bound to have a very wide scatter. These are cases of high rents for very good property, mostly in a very good state of repair. There is no evidence that where property is bad the rent assessment committees


are not going to be very firm indeed in cutting down the rents.
My hon. Friend also quoted what was happening in Manchester and the North. He suggested that this was a warning to London that it should not get too extravagant. My hon. Friend the Member for Holborn and St. Pancras was, I thought, a little unfair. I would have used stronger words earlier, but I have cooled down a little now. Having rebuked my hon. Friend the Member for Islington, South-West for not knowing the facts of cases in his own constituency, she then quoted what my right hon. Friend had said in Committee, that rents in Sowerby were subject to a free market, and went on to imply that my right hon. Friend had said that rents in Sowerby might be appropriate to London. I should like to quote what my right hon. Friend said, not because I want to score a point off my hon. Friend, but because I think that this goes to a very important point about fair rents. My right hon. Friend said:
He asked whether this would mean that a house in Chelsea and a house in Stepney would attract the same rent if they were identical. The answer is that they would not, because the locality is carefully mentioned and we have also to consider amenity as one of the objective factors. If there were two identical houses, one in Sowerby and one in London, the good assessor would assume … just as there is something extra on a wage for working in London … There will be a calculation for London and for parts of London. Hon. Members know this type of calculation is recognised in assessing gross rateable values. This difference will be taken into account as part of the objective study of the value of the house and rents for similar houses they would not be the same over the whole country."—[OFFICIAL REPORT, Standing Committee F, 26th May, 1965; c. 672.]

Mrs. Lena Jeger: The right hon. Gentleman mentioned the two criteria of locality and amenity. The word "scarcity" does not appear there. This was entirely my point, that the Minister had told us that scarcity was to be disregarded as a factor.

Mr. MacColl: I am now coming to scarcity. I have no right to lay down the law to tribunals or committees as to what is the proper interpretation of the word scarcity. It is a matter for the courts to decide if there is a fundamental misinterpretation of Section 27(2) of the Act. I will give my opinion, for what it is

worth, and that is not perhaps very much—

Mr. Whitaker: Would my hon. Friend explain how a tenant, denied legal aid, is able to take this matter to a higher court?

Mr. Graham Page: Perhaps I might assist the hon. Gentleman. The person concerned would get legal aid if he went to the High Court.

Mr. Whitaker: In a case like this?

Mr. MacColl: He does not get legal aid if he goes to the rent assessment committee. But if he goes to the High Court there is, as far as I know, no reason why he should not get legal aid, and I am fortified that the hon. Member for Crosby, as a practising solicitor, can say that with more firmness than I can.
I do not think that the phrase "not substantial", which is the test of the demand, requires or permits the assumption of at least some amount, although not a substantial amount, of excess of demand with at least some consequential element of scarcity value to be added to an otherwise appropriate rent. The phrase "not substantially" means, in my view, "not in substance" or as might be said alternatively, "not significantly". And in the context I would think that any excess of persons seeking accommoderation over the houses available would be of substance or significant as soon as it created a true scarcity of accommodation in the locality such as to inflate the level of a rent by any amount on that account. In short, my view is that the subsection has the effect which it was presented in Parliament as having, namely, the exclusion of all such scarcity value from a fair rent.

Mr. Lipton: After that very illuminating statement, now we know.

Mr. MacColl: That was a little unkind of my hon. Friend. I have been asked to give my interpretation of what is meant by "scarcity"—I am not a judge in a court of appeal; it is not my job to do that—and then I am rebuked for not making it clear. If my hon. Friend does me the credit of reading my remarks in HANSARD tomorrow morning at breakfast, he will find the matter tolerably clear.

Mr. Freeson: Is my hon. Friend aware that there are rent officers who are completely confused and at a loss to understand what is going on in the interpretation of this Section by the rent assessment committee?

Mr. MacColl: If my hon. Friend had done me the courtesy of being here when I started my speech, he would have known that I dealt with that point.
I come to Section 11. I have been pushed by the hon. Member for Crosby and my hon. Friend the Member for Islington, South-West (Mr. Albert Evans), on the one hand, to say that we should cut the Gordian knot and bring old controlled property in. On the other hand, the view has been expressed by most of my hon. Friends that we should not. My right hon. Friend has said that he will introduce an Order under Section 11 when the work on the committee and the rent officers is such that they can carry it. It is clear from what has been said in the debate and from all my knowledge that that moment is not here in London and will not be here for a very long time. There is a tremendous lot of work still to be done.
I want to say something on the question of free legal aid. I am not being facetious, but this reminds me of a very old Punch joke about an old lag who was asked by the judge whether he wanted a dock brief and a barrister to speak for him. Having had experience of dock briefs, he said, "No. I would rather have a good witness". That is the point about these cases. It is not the problem of presentation which is so difficult. It is not the problem of having legal advice which is so urgent. The difficulty arises—and this I recognize—when high-powered valuers are doing work and providing information for one side and there is no balancing force on the other. That is what I mean by saying that one wants a good witness.

Mr. Graham Page: May I point out that legal aid provides the cost of professional witnesses? That is one of the reasons why legal aid should be granted. It is not only for legal representation, but so that a person may get the good witnesses.

Mr. MacColl: But it may be a long and protracted business to get the machinery of legal aid working. I am the last person to decry the value of legal aid,

but it is difficult to know quite the best way of helping. What my right hon. Friend wants to look at is how to redress the balance, not so much in the case of a very old property where it is obvious to any normal person what the quality is without being a valuer, nor in the very expensive property where most people can afford to go to a surveyor and get advice, but in the case of middle-class accommodation where it is not so obvious and where it is important to have it looked at. That is the kind of case that requires examination.

Mr. Albert Evans: rose—

Mr. MacColl: I am sorry. I would give way to my hon. Friend, but I want to deal with what has been a very long debate, and there is not much time left.
A point was raised about the presence of the rent officer, and I should like to say that that is not a matter of law but one of practice. The view taken is that the rent officer is not a party to the proceedings. He is what might be called a previous stage in the operation, and it is not desirable that he should be brought into the later proceedings to express his opinion and argue in defence of his own decision. If he took part in them, he would be open to cross-examination, and long arguments would ensue in which he would be subject to a good deal of pressure. He is not there as an expert witness, but to make his judgment and recommendation to the rent assessment committee. It is then for the rent assessment committee to look at the position. However, there is nothing to prevent the rent assessment committees working it the other way; it is a matter for them.
I want now to say something about the problem of rents. Listening to the debate, I came to the conclusion that there are only two things to be done. One can either try to get a rent which is uniform, by which I mean not one that never changes, but, as my hon. Friend the Member for Holborn and St. Pancras wanted, one where it is possible to see the same sort of house in the same sort of area and know what its rent is. That would mean getting away from historical rents and looking at rents on some test of fairness.
The alternative is to take personal rents. As my hon. Friend the Member for Salford, East said, one must get away


from any objective test which would be unfair to a particular tenant who, because of his low earnings or because he has to live near to his job, has to live in a particular area. Once one gets on to personal rents, one gets away from objective rents.
That was the dilemma which faced us. We came down on the side of objective rents and got through the House the definition of what we thought was to be a fair rent. We have left to the rent officers and the rent assessment committees the job of interpreting that.
It would be foolish of me to say that they never make mistakes. They have to learn the hard way, by experience. Having given the instructions to the rent assessment committees and rent officers, all

our evidence shows that they have buckled down to the task in a fine way and are getting on with the job of launching this tremendous new experiment in relations between landlord and tenant.
My answer to the hon. Member for Crosby about expedited hearings is that a circular has been sent to the registrars of county courts, and we have no evidence that it is not working. Just as I cannot help my hon. Friend the Member for Salford, East further—

The Question having been proposed at Four o'clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Four o'clock.